what is bank crisis, Explainer: What happens when a bank collapses, how do big banks collapse, what will happen to your money if the bank collapses? – silicon valley credit suisse bank crisis: what is bank collapse and how much money safe if bank shut down
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What happens when a bank collapses?
After the sinking of America’s Silicon Valley Bank, the question again arose in the minds of the people that what is the sinking of the bank. Sinking of the bank, means if a bank reaches such a situation that the regulator had to take a decision to close it, then it is called bank failure. In case of bankruptcy of the bank, the regulator takes a decision to close it in the interest of the account holders and investors. After the central bank of any country, it has the right that it can decide to close the bank. The regulator takes this decision when it sees that the bank is not able to meet the needs of its customers and investors and its continuation can be dangerous for the account holders of the bank, then taking the final decision, it decides to close it. is taken.
when a bank collapses
If a bank does not have cash to give to its account holders and investors, then in that case the bank is declared bankrupt. When the bank has more liabilities than its assets and the investors start withdrawing their money, then the financial condition of the bank gets worse. When the bank becomes so cash crunched that it is unable to fulfill its obligations towards the customers, then the bank is declared bankrupt. Bankruptcy means its sinking. As soon as the bank collapses, the deposit-withdrawal in the bank is banned. The banking services of the bank are stopped. Bank’s credit card, debit card, net banking all banking services are stopped immediately. Depending on the banking regulatory situation in that country, customers are allowed to withdraw only a certain amount from their account.
why do banks fail
Any bank runs on money. Pays interest on customer deposits and earns that money by lending and investing in bonds with high interest rates. When the confidence of the customers starts shaking with the bank, they feel that their money deposited in the bank is not safe and they start withdrawing the money, then the concern of the bank increases. This is called a bank run, which increases the concern of a bank. In this situation, the bank has to sell its invested securities, bonds at a loss to return the money to the customers. This loss is the biggest risk for the bank. Because of which banks fail.
The mistake of Credit Suisse that wrote the story of the bank’s ruin, was forced to be sold to the ‘enemy’
What happens to your money if your bank collapses?
What will happen if the bank in which you have an account, you have deposited money? There is a law for this in India. Bank accounts are frozen when the bank collapses, meaning you can’t withdraw money. Deposit Insurance and Credit Guarantee Corporation of the RBI i.e. DICGC, to the account holders of the insolvent bank, the amount secured is returned up to Rs 5 lakh. That is, you will definitely get Rs 5 lakh deposited in your bank account. You can get the amount above this after the condition of the bank improves or after the merger of the bank with other banks. That is, up to a maximum amount of Rs 5 lakh is safe in your bank account. Whereas in the US, when 563 banks failed between 2001 and 2009, the US government implemented the Federal Deposit Insurance Corporation (FDIC). Bank account holders in the US were allowed to withdraw up to $2.5 million under the Securities Investor Protection Corporation.
Company here and account in the US! So is a bank collapse in the US bound to create a storm in India?
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