PMC Bank crisis: Should you change your bank? Here’s how to evaluate – The Economic Times

In case of failed ATM withdrawals or fund transfers, too, banks have to adhere to RBI rules.

The Punjab and Maharashtra Co-operative (PMC) Bank crisis, which has left lakhs of depositors unable to access their lifetime’s savings, has alarmed customers of other banks as well. An ET Wealth survey has revealed how much the confidence of banking customers has taken a beating.

But there is reassuring news as well. A large majority (65.5%) of the 1,359 respondents who participated in the survey are largely satisfied with their banks. However, it can’t be ignored that over a third of those polled are dissatisfied with their banks’ services. The reasons for discontent are several, with poor customer service topping the list. Banks also have a poor record while resolving customer grievances, with 67% of unhappy respondents rating their bank’s responsiveness to their complaints as ‘poor’.

The PMC Bank effect
Repercussions of the PMC Bank scandal is something banks have found difficult to shake off. The majority of respondents (over 71%) who are dissatisfied with their banks say their confidence in their banks was affected due to the crisis. This is not surprising given that restrictions on withdrawals from PMC Bank sparked panic in September, and the RBI had to step in to reassure customers of all banks. “There are rumours about certain banks, including cooperative banks, resulting in anxiety among depositors. RBI would like to assure the general public that the Indian banking system is safe and there is no need to panic on the basis of such rumours,” the RBI had said in a statement in October.

On their part, customers need to know facts. Deposits of up to Rs 1 lakh are insured by the Deposit Insurance and Credit Guarantee Corporation. This is the maximum cover a depositor can hope for, even if he holds accounts across multiple branches. In the aftermath of the PMC Bank scam, there has been a growing clamour for an increase in this limit, which could fructify in future.

“In the past, bigger banks have taken over troubled ones. RBI has the power to protect depositors by drawing a scheme of amalgamation with another bank if it is feasible. Once the weak bank is merged, the depositor’s money is safe and they can continue banking as before,” says V.N. Kulkarni, a former banker and financial counsellor. Examples include Bank of Rajasthan’s acquisition by ICICI Bank in 2010 and earlier, Oriental Bank of Commerce’s takeover of Global Trust Bank in 2004.

Besides, there are steps that you can take to safeguard your interest. The key is to diversify your investments across bank deposits, mutual funds, post office small savings instruments and so on to make your portfolio resilient. Even within bank deposits, look at spreading out the risks. “Not only should you avoid banking with just one bank, but also deposit your money in different combinations. For example, you can open joint accounts, where you are the first accountholder in one and your spouse takes on the role in the second,” advises Kulkarni.

PSU banks fail faith test
While government backing insulates them from crises, there is no dearth of grievances against public sector banks. Over 44% of respondents, who are PSU bank customers, said they were dissatisfied with their bank. “Uncaring staff is often the most common grievance. Many branch officials lack knowledge of rules and seldom look up the rule book in case of doubts. Their online facilities are also sub-par,” explains consumer activist Jehangir Gai. In 2017, the Banking Codes and Standards Board of India’s (BCSBI) graded banks on their compliance with the voluntary code of commitment to customers, and only one PSU bank received a ‘High’ rating. Of the 12 with the highest ratings, eight were private and three were foreign banks.