America banking crisis: how gullak in your home will save you in silicon valley bank like crisis
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Will it affect the banks of India?
The news of the sudden sinking of the Bank of America has spread a wave of anxiety all over the world. People are remembering the collapse of Lehman Brothers in 2008. This time also the concern is that its effect may not reach India and our financial sector, which is now gradually getting stronger, may not falter again. The impact of Silicon Valley on Indian banks is negligible. If we look at the trend of the stock market, then this point seems to be stronger. Banking experts are also insisting that the sinking of the American bank will not affect Indian banks. Rajnish Kumar, former chairman of the country’s largest public sector bank SBI, also said that America’s Silicon Valley bank crisis will not affect the Indian banking system. Indians do not have exposure to US banks. Silicon Valley Bank is not such a big bank that it can affect the banking system. However, those startups will definitely be affected, whose money is deposited there. Indian banks have many layers like regulatory, lending rules, monitoring by RBI, which prevent them from making mistakes like Silicon Valley Bank.
This habit of Indians will save them
If any incident like silicon happens in India, then the saving habit of Indians will help them out of trouble. People of India focus more on savings than on debt. If we look at the figures, according to the estimates of the rating agency Crisil, by the year 2027, the financial savings of the people of India will increase from Rs 135 lakh to Rs 315 lakh crore. Only household savings i.e. what we save at home has reached 43.9 lakh crores. Our savings habit will keep us safe in such banking crisis. Then whether you save in a piggy bank kept at home, in a post office savings scheme or in physical assets. Here people invest in land and gold and save it for their future or for difficult times. In the financial year 2021, 52.5 percent people in India saved through physical savings, while 47.5 percent people saved by investing in assets. Another habit of Indians which saves them in case of banking crisis or bank bankruptcy is to save in banks with fixed limits. The habit of Indians investing in different assets like Share Market, Mutual Fund, Insurance, FD, Post Office Saving Scheme, Government Scheme, Gold, Plant is effective to save them in banking crisis. Talking about the financial habits of the people of India and America, the habit of taking loans of people in America is different from ours. Interest rates were low in America, due to which taking loans was a habit among the people there. While Indians are afraid of loans. People avoid taking loans because of the high interest rates. We have less dependence of people on bank loans.
Why American bank drowned
The Silicon Bank of America was started in 1983. But within 30 years, the condition of this bank became such that it was locked. Talking about the whole story of the sinking of the bank, the main task of this bank was to invest money in startups around the world. This bank made most of its investments in US bonds. Bonds started losing value after the US Federal Reserve raised interest rates. On the other hand, due to increase in inflation and other reasons, the funding of startups started decreasing. People and startups started withdrawing money from the bank. The bank had to sell its bonds at a loss to make payments to customers, which resulted in a loss of over Rs 10,000 crore. The customers of the bank withdrew Rs 3.5 lakh crore from the bank.
How India dealt with the crisis of 2008
In the year 2008, when the banking crisis started in America, to deal with it, RBI relaxed the monetary policy a lot. Earlier the repo rate was 6.5%, which was reduced first to 5.5%, then to 5% and then to 4%. The cash reserve ratio has been reduced. Due to these steps of RBI, about Rs 5,60,000 crore came out in the form of liquidity in the economy. To increase the liquidity in the market, it also spent heavily on public spending.
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