The recent collapse of banks around the world has caused fear in all, including us Indians. Some questions that arise in people’s minds include: What will happen to banks in India? Are they crashing? Can they crash? How can I sleep peacefully when I doubt the stability of my bank?
While we still remember well how our grandparents discussed banks as the safest place to store money, suddenly the whole idea seems outdated, as do some of their ideologies! So orthodox, so no risk! Why can’t they understand that we are the “X”, “Y” or “Z” generation that will lead India to superpower ?!
Orthodox, prone to risk … do these words mean anything in relation to banking? It does not take long to understand that these two words have ensured that the Indian banking system and Indian banks have survived the global crisis and continue to do so.
What does that mean?
The Indian banking system has largely evolved from business families or groups of business families that come together to create a bank. Indian businesses have historically been risk averse and are very calculated in their business dealings. Thus, the same philosophy was passed on to the banks they founded, and in turn, it defined the Indian banking system, a system that did not want to grow seeds, but steadily, step by step. This meant that there was never too much pressure to increase business by taking unwarranted risks.
This philosophy is also the reason why it used to take months and sometimes years to get a loan from an Indian bank. It was a frequent occurrence that a bank employee withheld loans so as not to be burdened by foreclosure / pursuit of default! Propensity to risk? Definitely!
The orthodox style of governance meant that banks were not very keen on innovation. Thus, we have rarely had to see any innovative product or exotic financial instrument in the banking sector. This, in turn, meant that what was available for the deal was simple. The work of the plant, tested products that are understood by almost everyone. At least in this context, we could call ourselves financially literate compared to our counterparts from other parts of the world who could not understand complex financial products such as air loans, exotic “F&S”, etc. awareness.
The Central Bank, the Reserve Bank of India also developed in the same way. She was more cautious and conservative in her approach to banking. This approach led to the fact that the rules and regulations issued by the RBI were very strict and did not have many loopholes. The central bank has also consistently battled pressure from private business and the political system.
The above observations show that while our risk-free orthodox system may be tough for the Twitter-era generation at its slow pace, it is robust and strong and seeks to overcome and survive any crisis. We can really sleep safe with the satisfaction that our banks are safe. Yes, your Indian bank (not Indian bank) is safe !!