You must have already heard of the PMC Bank situation where savings of several depositors are stuck after the crisis at the financial institution. Agreed, the Punjab and Maharashtra Co-Operative Bank debacle has certainly been bad for the Indian banking sector but all is not lost yet. The Central Government is already attempting to tackle the situation and bring it under control with the RBI (Reserve Bank of India) by its side. In fact, this is a time when you should actually repose more trust and confidence in your bank who has been with you all these years instead of looking for an exit immediately.
As per several reports, a whopping 70% of people in the Indian banking system are happy and satisfied with their banking institutions. However, some customers do point to poor customer support and a laggardly approach in general as being pet peeves if you take the remaining 30% into account. Yet, if you look at the overall picture, the confidence offered by the Government and RBI is of immense importance. Both these institutions of the country play a vital role in safeguarding customers and even the RBI stepped in to reassure customers of all banks in September this year after the PMC Bank crisis led to some fears. The good news is that the RBI has issued an official assurance, stating that the banking system of the country remains safe and in good hands.
Some aspects that you should know
Deposits are insured up to Rs. 1 lakh by the Deposit Insurance and Credit Guarantee Corporation. In fact, there is a proposal from the Central Government to hike this threshold as well. You will have to wait till something official transpires on this count. The Government and RBI have also been trying to safeguard customers by executing and recommending mergers. Once weaker banking institutions are merged into larger entities, the customer deposits will remain safe and sound as always. This is where the apex bank is playing a crucial role by planning extensive mergers in the banking system wherever it is deemed feasible.
Ultimately, there will be fewer but stronger banking entities where your money will remain safe and sound. Some of the major examples in this regard include the mega merger of five associate banks into SBI and also the takeover of Global Trust Bank in the year 2004 by Oriental Bank of Commerce. ICICI Bank also took over Bank of Rajasthan in the year 2010. If it makes you feel more secure, you should look at diversification of all your investments into multiple avenues such as banking deposits, post office deposits, mutual funds, real estate and so on. Always have accounts with multiple banks instead of a single institution if you wish. Deposit money in various combinations. Open joint accounts with your spouse and children if need be. A radical switching of banks may not be really necessary in the current scenario as per experts, particularly if your bank is doing well or is already up for a merger with a larger, more established banking entity.
When should you change?
Instead of worrying overtly about failure of the bank and the safety of your money (the RBI and Government do have your back in this regard), you should focus on the key service aspects of the banking institution. Examine your relationship with the banking institution over the years and how it has served you in the past. Look at the ease of operations and how familiar you are with the system. Often, building relationships takes a long time and this is one thing you should consider prior to switching banks.
Analyze whether you are satisfied with the overall performance of your bank in terms of customer service and support. Are your complaints being addressed on time? Do you have to wait long for getting things done? Are the banking staff efficient or otherwise? Is the online system and overall banking mechanism smooth and trouble-free? Can you get customer service in a prompt and friendly manner? These are questions, to which you must have the answers. If there are issues on these core aspects, then you can change your bank. What happens is that many customers feel dissatisfied with slow customer service, lack of promptness in addressing complaints, slow online banking servers/systems, lack of knowledge of regulations of banking officials and so on.
Mis-selling is something to be carefully ascertained
There are high margin financial products often retailed by third-party staff at banking institutions which may be instances of mis-selling since these products may not really help the customer that much. Several people have received wrongful investment advice and suggestions from their banking personnel, particularly in terms of buying insurance policies. Mis-selling is something that you have to closely analyze. Have you been mis-sold a policy before? If yes, you should get proper advice and close out the policy before investing anymore into the same.
Are you getting good rates of interest on home loans?
When it comes to home loans, if you have opted for one, are you getting low rates of interest? Is your bank transmitting policy rate cuts swiftly to you? This is another reason why people often wish to transfer their home loans and change banks if they get a lower interest rate elsewhere. However, if you already have a long-term relationship with your bank, then you may have already got a lower rate of interest. Check whether, after paying the requisite charges for loan transfer and other processing fees, the costs of shifting the home loan to another bank are lower than what you will end up paying in the current framework. If the answer is yes, then you can consider a home loan balance transfer.
Some other key aspects
- Violations should always be reported promptly to the ombudsman. Most insurance linked complaints are about mis-selling of policies. In many cases, policies with regular premiums are passed off as single-premium products and the customer realizes the same upon getting the reminder for renewal of the policy. Often, intermediaries or third party salesmen at banks attempt at getting ULIPs bought by customers, positioning them as mutual fund investments.
- Only complain to the ombudsman if your bank fails to take any action on any complaint or issue within a period of 30 days or if the response is not at all satisfactory.
- Do not sign any form or offer blindly. Always read it yourself and understand the key tenets before proceeding further.
- You can consider choosing a new bank if you are thoroughly dissatisfied with customer service and want a change or if you are looking for higher deposit rates or lower loan interest rates.
- While choosing a new bank, check the financial strength of the institution and its market performance along with reviews related to customer service.
- Look for a diverse range of financial products and investment options when selecting a new bank.
- Always look for stable and reliable online banking systems, user friendly and transparent processes, clearly delineated service charges and friendly staff members.
The core take-away
Changing your bank is not an overnight step. Do it only when you are absolutely sure that you will save more money by way of home loan interest at another institution if that is your requirement. Do it only when you know that the customer service and grievance redressal mechanism will never change at the institution. Otherwise, since you have already built a relationship, stick with your bank and repose confidence in the institution. It will naturally stick by you as well.