I read a story about a bank's closure and its assets being seized, depositors losing their money. I want to ask if one should be keeping his money divided into several different banks instead of one in order to avoid losing the money in a case of forced closure of the bank? Thanks
2 Answers
I want to ask if one should be keeping his money divided into several different banks instead of one in order to avoid losing the money in a case of forced closure of the bank?
Yes it does make sense. In Pakistan the SBP [State Bank of Pakistan] has just this month [June 2018] created a DPC [Deposit Protection Corporation]. It is proposes to protect upto Rs 2,50,000 per person per bank. So if you have more than Rs 2,50,000 it makes sense.
Also note as this has just started, most Banks are not yet members. It may take a while for Banks to be members of DPC and pay the required premium.
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1The number "2,50,000" seems odd to me, I would expect either "250,000" or "2,500,000". Can you clarify whether you meant one of those values, or if the unusual formatting is intentional? Jun 29, 2018 at 16:54
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One lakh = 100,000 rupees. So twohundred fifty thousand rupees = 2 lakh 50,000 rupees = 2,50,000. Jun 29, 2018 at 21:55
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2@KamilDrakari Indian subcontinent uses different separators. en.m.wikipedia.org/wiki/Indian_numbering_system– DheerJun 30, 2018 at 2:21
Apart from legal protection that retail customers might have, people don't lose 100%. A bank may become unable to pay, but they have given people loans or mortgages that will be paid back. If I took a million dollar mortgage over 30 years to buy a very nice home and the bank goes bankrupt, I still pay that mortgage back over 30 years, so the bankrupt bank still has money coming in and going to depositors over many years.
For example, the bankrupt Herstatt Bank paid back 97% of its deposits over more than 20 years.
answered Jun 29, 2018 at 22:02
