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<div type="image" title="Are Indians depositing less money in banks, or more in mutual funds? Turns out, it&amp;#39;s neither of those." msid="113663806" hostid="261" sizebytes="1121785"></div> Over the past few months, there’s been a lot of brouhaha about the lagging pace of <keyword id="20202062" type="General" weightage="20" keywordseo="bank-deposits" source="keywords">bank deposits</keyword> in India. Simply put, the rate at which Indians are depositing their hard-earned money in banks has been falling constantly, and some blame the increasing financialisation of <keyword id="20751315" type="General" weightage="20" keywordseo="household-savings" source="keywords">household savings</keyword> in the country or the rising preference of Indians towards <keyword id="19929240" type="General" weightage="20" keywordseo="mutual-funds" source="keywords">mutual funds</keyword> and shares. So, the hypothesis is that people are choosing to invest more in mutual funds and the Indian <keyword id="19949641" type="General" weightage="20" keywordseo="equity-markets" source="keywords">equity markets</keyword> through direct investments, IPOs, or NFOs, the money flowing into Indian banks in the form of deposits is slowing down. But is that really the case? <h2>A crisis or a phase?</h2><keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords" meta.keywordsubtype="org" meta.entityname="RBI" meta.hostid="261" meta.entityid="RBI">RBI</keyword> data suggested that for the quarter ended June 2024, bank deposits grew at 11.7%. On the other hand, credit growth has outpaced this at 15%. This means that the outflow from banks as loans is far greater than the inflow into them in the form of deposits in Q1 of FY 2024-25. The situation largely saw cut-copy-paste in the first week of September as well, with loans registering a 13.3% YoY growth during the period, while deposits rose only 11.1%. This gap has only been widening for the last 3 years. Since deposits are how banks gather assets to further lend and earn interest income as a consequence, even a slight dip could set the alarm bells ringing for banks, and rightfully so. And truth be told, mutual funds are indeed taking on bank deposits in a big way. Per a report by Franklin Templeton, in August 2024, the AUM (assets under management) of Indian mutual funds, or the total funds managed by them, stood at 31.3% of total bank deposits in the country, up from 24.20% during the year-ago period. As of August 2024, the AUM of mutual funds stood at Rs 66.17 lakh crore, an all-time high. But all said and done, is this really the reason why the rate of bank deposits is falling behind? SBI has dismissed this to be a “statistical myth”, and experts point out that since equity and fund houses also keep the cash in their respective bank accounts, there’s no cause for concern. So, is financialization really to be blamed for the trailing tempo of deposits? Or is something else happening behind the scenes? We take a closer look: <h2>First, are household deposits really slowing down? And is that a cause of concern?</h2>Data from Motilal Oswal suggests the contrary. Deposits grew by around 10.4% between March 2020 and August 2024. Data from RBI also highlights that as of August 9, 2024, bank deposits witnessed a YoY growth of 10.8%. The loan-to-deposit ratio for the retail segment, which indicates what percentage of its total deposits the banks lend out as loans, has stayed at 77.5%, above the 77% mark for the tenth straight month. <div type="image" title="Yes, household deposits (as % of total deposits) have dipped, but the drop is far from significant" msid="113663882" hostid="261" sizebytes="306706"></div> Also, we can’t forego the fact that the share of Indian households in bank deposits has indeed slowed down. However, data from Axis AMC shows that the dip is marginal—from 63% in 2022 to 62% in 2023 and 61% in 2024. What has slowed down even more considerably is the share of government deposits in the aggregate bank deposits, which has dipped from 14% in 2018 to 9% in 2024. So, it's not just household deposits, you see. Moreover, as of March 2024, the collective CASA ratio (current and <keyword id="114757" type="General" weightage="20" keywordseo="savings-account" source="Orion">savings account</keyword> deposits) of all commercial banks in India stood at 41.00%, down from 43.1% in March 2023 and 45.2% in March 2022, marking a nearly 5% point decline over the past year, while still staying over the 10-year average of 39.2%. This implies that Indian banks are relying more on higher-cost funds (savings accounts), which can limit their profitability. <h2>What is this financialisation of savings we are talking about?</h2>Then again, there is no doubt about the growing affinity of Indians towards mutual funds and stock markets. Recent data from CBDT (Central Board of Direct Taxes) highlights that India’s net direct tax collection surged by around 22%, driven exclusively by the significant uptick in the collection of Securities Transaction Tax (STT), which doubled to Rs 26,154 crore, from Rs 13,352 crore in the year-ago period. Why does this matter? STT is levied when you buy or sell equity shares on stock exchanges, sell <keyword id="6361918" type="General" weightage="20" keywordseo="equity-mutual-funds" source="Orion">equity mutual funds</keyword>, and trade in futures and options in the equity segment. Such taxes, including the multiple other taxes in equity market investments, are considered as leakages as the money moves out of the economy into government coffers. Data from a ValueQuest report explains that over the last 20 years, the markets have handsomely rewarded the investors, generating over $900 billion in incremental value for them. This is the major driver behind the dramatic rise in investment flowing towards the equity markets. There’s further proof of this budding romance, if you check the demat pudding. The number of demat accounts, which are a primary requisite for participating in the stock markets, also burgeoned by 42.3 lakh in August 2024, taking India’s total tally of demat accounts beyond 17 crore. To put this in perspective, this is almost equivalent to the population of just 8 nations in the world, including China, the US, Brazil and more. Vivek Iyer, Partner, Grant Thornton Bharat thinks it's rather important, as well. “Financialisation of household savings in India is an indication of deepening capital markets in the market, especially from a retail investor standpoint. Bank deposits with a modest rate of return are no longer the only option for savings for investors. Investors today have more avenues for wealth creation in the form of public capital markets, which have democratized wealth creation and provided equality of opportunity to retail investors”, he says. Yes, Indians are investing more and more in the markets, and in mutual funds. But is it a sin to look out for inflation-beating returns, which the stock markets offer, and vanilla bank deposits don't? After all, the allure of 12-13% annual returns offered by <keyword id="45369" type="General" weightage="20" keywordseo="equities" source="Orion">equities</keyword> can certainly pale the stability offered by good old deposits, which generally do not go beyond 9% when it comes to annual returns. But all of this is not what is behind the slowdown. India is still a toddler in the school of savings financialization, with less than 10% of the population holding a demat account, and less than 5% of us saving in equities. That's a drop in the ocean of deposits, far inadequate to trigger a tsunami. <h2>Tell me why lagging deposits have nothing to do with Indians investing more in mutual funds!</h2>Says Shweta Rajani, Head - Mutual Funds, Anand Rathi Wealth Limited, “Households' equity holdings composition grew from 11.1% in FY 23 to 14.7% in FY 24. This trend reflects a growing awareness of investment options, empowering individuals to take control of their financial futures. Despite this transition towards equities, banks still hold a significant share of household financial savings—33.5% in FY24 compared to 34.9% in FY23”. Also, household savings and their subsequent financialization do not have much to do with deposit creation, which is entirely made by banks. What actually drives increased deposits is credit growth or increased lending. When interest rates are eased, people tend to borrow more and spend more, which circulates more money in the economy. For the past 4 years, RBI has been tightening the screws on interest rates, which raises the cost of borrowings, and makes it more expensive to take loans, putting a dampener on credit growth, but effectively curbing inflationary pressures. The last time RBI cut the repo rate by 40 basis points was back in May 2020, 4 years ago. The lag in <keyword id="19998084" type="General" weightage="100" keywordseo="deposit-growth" source="keywords">deposit growth</keyword> we’re witnessing is almost 3 years old. Coincidence much, or just good old economics at work? But with the Fed recently setting a rate cut precedent by slashing 50 bps off its interest rate, RBI is expected to follow suit in the next MPC (Monetary Policy Committee) meeting, scheduled for November 2024. A rate cut would ease the aforementioned high cost of borrowing, and increase loan-taking for corporates and institutional investors, thereby stoking consumption in the economy. And then, deposit creation in banks is likely to return to its former glory. If not, then that would be a curious case to unravel! But that worry is for another day. Do you have insights or personal experience to share on your personal finances or money? Contact us at <a target="_blank" class="c-link" href="mailto:businessinsider@timesinternet.in">businessinsider@timesinternet.in</a>.

Simply Put: A Deposit Dilemma — What's the fuss about a crisis in Indian bank deposits? Are mutual fund investments to blame?

The State Bank of India (<keyword id="19898108" type="General" weightage="20" keywordseo="sbi" source="keywords">SBI</keyword>) in its latest report has asked for <keyword id="20213295" type="General" weightage="20" keywordseo="tax-reforms" source="keywords">tax reforms</keyword> after concerns were flagged over the recent decline in <keyword id="20202062" type="General" weightage="100" keywordseo="bank-deposits" source="keywords">bank deposits</keyword>. The report says tax Reforms for Deposits can accentuate the banking system's stability and resilience to the next level. SBI attributed the fall in deposits to the varied rates of return offered by different <keyword id="20139443" type="General" weightage="20" keywordseo="investment-options" source="keywords">investment options</keyword> for similar time frames and different tax rates on <keyword id="22837794" type="General" weightage="20" keywordseo="returns-on-deposits" source="keywords">returns on deposits</keyword>. The <keyword id="20352499" type="General" weightage="20" keywordseo="SBI-report" source="keywords">SBI report</keyword> said that "<keyword id="20658792" type="General" weightage="20" keywordseo="tax-treatment" source="keywords">Tax treatment</keyword> of bank and non-bank channels are non-uniform, even as bank deposits have a wider and denser pass-through effect across the populace sensitivity of Deposits on Tax is as much as 7 per cent" The report noted that a bank deposit of Rs 10 lac in a Savings Bank (SB) account at an investment return of 3 per cent would generate Rs 30,000 in returns and after accounting for taxes and exemptions, the <keyword id="22837795" type="General" weightage="20" keywordseo="net-return" source="keywords">net return</keyword> would be Rs 16,000. The report adds that the net returns vary significantly if deposits are made in different instruments like <keyword id="21041176" type="General" weightage="20" keywordseo="term-deposits" source="keywords">term deposits</keyword>, short and long-term investments in debt funds, liquid funds or bonds. The tax rates on these deposits also favour saving banks or term deposits. The report illustrates a term deposit of up to one year with the same principal amount of Rs 10 lac at a yield of 6.25 per cent would result in a net return of Rs 50,000 after taxes. But for term deposits exceeding one year the interest rate is higher and with an interest rate of 7.25 per cent, the gross return would be Rs 72,500. After taxes, the net return would be Rs 58,000. The data highlights that similar type of investments for the same period generates significantly different returns because of different tax treatment by the government. Similar variations are observed in other <keyword id="20105084" type="General" weightage="20" keywordseo="investment-plans" source="keywords">investment plans</keyword> as well. For instance, investments in equity and mutual funds with a 2 per cent dividend income of Rs 10,00,000 generate Rs 20,000, which after taxes the net return is Rs 16,000. However, Short-term investments of less than one year in equity and mutual funds, offering an 11 per cent return generate Rs 1,10,000, with a net return of Rs 88,000 after taxes. This investment if made in Long-term investments of more than one year the return increases to 15% on Rs 10,00,000 and generates Rs 1,50,000 annually. With a lower tax bracket of 12.5 per cent tax on long-term investments and applicable exemptions, the net return is Rs 1,43,750. These variations in returns across different deposits and investment options highlight the complexity and thus investors are choosing the higher return options over the bank deposits which in turn poses a threat to the deposit growth in the banking sector.

Decline in bank deposits because of non-uniform tax treatment on various investment options: SBI report

The <keyword id="19895344" type="General" weightage="20" keywordseo="Enforcement-Directorate" source="keywords">Enforcement Directorate</keyword> alleged Saturday that the CPI(M) in <keyword id="19896018" type="General" weightage="20" keywordseo="Kerala" source="keywords">Kerala</keyword> was holding proceeds of <keyword id="19899231" type="General" weightage="20" keywordseo="money-laundering" source="keywords">money laundering</keyword>, as it attached a land parcel and <keyword id="20202062" type="General" weightage="20" keywordseo="bank-deposits" source="keywords">bank deposits</keyword> worth Rs 73 lakh of the political party in a <keyword id="19913348" type="General" weightage="20" keywordseo="probe" source="keywords">probe</keyword> linked to the Karuvannur Service Cooperative Bank "scam". Assets worth Rs 28.65 crore of various individuals and entities linked to the case have also been attached by the federal agency after a provisional order under the <keyword id="19912399" type="General" weightage="20" keywordseo="prevention-of-money-laundering-act" source="keywords">Prevention of Money Laundering Act</keyword> (PMLA) was issued. Official sources said the party may be nam<keyword id="19956083" type="General" weightage="20" keywordseo="ED" source="keywords">ed</keyword> as an accused in the next supplementary chargesheet to be filed in this case. If so, it will be the second political party to be arraigned as accused in a money laundering investigation after the Aam Aadmi Party. AAP has recently been named by the ED in the Delhi excise policy case. The CPI(M) vehemently denied the charges of wrongdoing and money laundering. The attached assets include 18 immovable properties, valued at Rs 28.65 crore, consisting of lands and buildings in Kerala of the beneficiaries of the "scam", including an immovable property worth Rs 10 lakh registered in the name of a district secretary of the Communist Party of India (Marxist) for a party office, the ED said in a statement. The attachment also includes eight movable properties, including a credit balance of Rs 63.62 lakh in eight "undisclosed" bank accounts of the CPI(M) local area committees in Thrissur, it added. The agency claimed that the CPI(M) received these funds from the beneficiaries as donations through the governing body and the party is "in possession of proceeds of crime" which has been invested in the purchase of immovable properties and credited to its five bank accounts in the Karuvannur Service Cooperative Bank Ltd. The bank is promoted by the party. The CPI(M) rejected the ED charges, saying it would legally and politically fight any move by the agency to arraign it in the case linked to the alleged multi-crore Karuvannur bank scam. Party state secretary M V Govindan alleged that the ED was trying to make opposition parties and their leaders accused in various cases due to political reasons. He also accused the central agency of attempting to create a smokescreen as it had failed to collect any evidence against the party. The ED believes that the land parcel attached by it was meant for the CPI(M) party office and was purchased using alleged kickbacks from the loanees or beneficiaries of the loans sanctioned by the Karuvannur Service Cooperative Bank. The agency has relied on the "confessional" statements of at least two accused in this case who claimed in their statements recorded before a judicial magistrate that the purported irregularities in the bank were orchestrated at the behest of CPI(M) Thrissur district committee leaders. The ED alleged that "bogus loans" were sanctioned by the Karuvannur Service Cooperative Bank on the same property multiple times without the knowledge of members of the society. "Investigation found benami loans were sanctioned to non-members against inflated property valuations in the names of other members and such loan funds were siphoned off and laundered by the accused beneficiaries," it said, adding that the loan amounts were disbursed in cash to avoid a money trail. "Such benami and illegal loans were sanctioned at the behest of the secretary and the governing body of the society in connivance with the then-bank manager, at the behest of the Thrissur district committee, CPI(M). "In return, the Thrissur district committee, CPI(M), collected money in the form of donations and salary cut from the beneficiaries and society committee members into their undisclosed and illegally opened bank accounts in the same society," the agency said. These funds, according to the ED, were utilised for the purchase of land worth Rs 10 lakh by the secretary of the Thrissur district committee of the CPI(M) for the construction of the party office, which has now been attached as proceeds of crime. Govindan said it has been a decades-long practice of registering the office and other assets of party units in the name of the respective district committees. What role does the party have in the office constructed by one of its local committees, he asked. But the ED is now trying to tarnish the image of the CPI(M) in the name of the assets of one such party unit, Govindan claimed. "We will fight it legally and politically. We haven't got any notice in this regard so far," he told reporters. The ED filed a chargesheet in this case against 55 accused entities in November last year. The money laundering case stems from 16 FIRs registered by the <keyword id="20086884" type="General" weightage="20" keywordseo="kerala-police" source="keywords">Kerala Police</keyword> (<keyword id="20146853" type="General" weightage="20" keywordseo="crime-branch" source="keywords">Crime Branch</keyword>) in Thrissur in 2010. Four people have been arrested by the ED in this case so far.

After AAP, ED attaches land, bank deposits of CPI(M); says party holding proceeds of money laundering

<keyword id="19896016" type="General" weightage="20" keywordseo="new-delhi" source="keywords">New Delhi</keyword>, Global brokerage <keyword id="19906485" type="General" weightage="20" keywordseo="goldman-sachs" source="keywords">Goldman Sachs</keyword> has flagged multiple headwinds to deposit growth in Indian banks as it loses its attractiveness. It has cited head winds like strained financial savings, the rise of alternatives such as stock market investments and strong growth in alternate government savings schemes (<keyword id="20699846" type="General" weightage="20" keywordseo="ppf-and-small-savings" source="keywords">PPF and Small Savings</keyword>), size of which has grown to 21 per cent of the total deposits. Interestingly, increase in alternative government savings schemes is equivalent to 34 per cent of the increase in deposits over FY21-23, Goldman Sachs said. It said: "We believe the system would need to offer attractive rates to make bank-deposits attractive. "We believe consumer lending is nearing the consolidation phase driven by large volumes of unsecured lending with an estimated 120mn unsecured personal loans which increased 4X over the last three years; rising financial leverage at <keyword id="20319599" type="General" weightage="20" keywordseo="households" source="keywords">Households</keyword> with gross-financial-liabilities to gross-financial-assets increasing to all time peak of 40 per cent, a sharp reduction in net financial assets (financial savings minus financial assets) from 11 per cent+ of GDP to less than 5 per cent of GDP and deteriorating performance of portfolio on boarded over the last 12 months." Bank deposits also see competition from government small savings investments which have now grown to 20 per cent of the total deposit pool in the system, and offer higher interest rates compared to bank TD. The share of deposits in the household financial asset mix has decreased to only 45 per cent in FY23 (compared to 48 per cent in FY21), with incremental flow of only 35 per cent going towards deposits. This has led to flows of net financial assets as a proportion of GDP to more than halve from FY21 to FY23, Goldman Sachs said. --IANS biz/san/svn

Bank deposits losing attractiveness as govt savings schemes see strong growth

Mumbai, The Reserve Bank on Friday said that as much as 93 per cent of Rs 2000 currency notes that were in circulation on May 19 -- the day when the currency was withdrawn from circulation -- have been returned to banks. According to the data received from the banks, the total value of Rs 2000 banknotes received back from circulation is Rs 3.32 lakh crore up to August 31, 2023, it said in a statement. "Consequently, Rs 2000 banknotes in circulation as at the close of business on August 31, 2023 stood at Rs 0.24 lakh crore. Thus, 93 per cent of the Rs 2000 banknotes in circulation as on May 19, 2023, have since been returned," it said. Data collected from major banks indicates that out of the total banknotes in Rs 2000 denomination received back from circulation, about 87 per cent is in the form of deposits and the remaining around 13 per cent has been exchanged into other denomination banknotes. The <keyword id="6354335" type="General" weightage="80" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword> had announced the withdrawal of Rs 2000 banknotes from circulation on May 19, 2023.. The total value of Rs 2000 banknotes in circulation, which amounted to Rs 3.62 lakh crore on March 31, 2023, had declined to Rs 3.56 lakh crore as at the close of business on May 19, 2023. RBI requested the members of the public holding the high-value banknote to utilise the remaining period until September 30, 2023, to deposit and/or exchange them.

RBI says 93% of ₹2000 notes returned to banks

<ul class="summary-list"><li>Charles Schwab has enough liquidity in case all bank deposits "ran off," CEO Walt Bettinger said.</li><li>And the company wouldn't have to sell a single security, he told the Wall Street Journal.</li></ul><a href="https://markets.businessinsider.com/stocks/schw-stock">Charles Schwab</a> could continue operating even if it were to lose all of its deposits, CEO Walt Bettinger told the <a href="https://www.wsj.com/articles/charles-schwab-says-it-could-ride-out-a-deposit-flight-a8b2a626?mod=Searchresults_pos1&amp;page=1" target="_blank" rel="noopener">Wall Street Journal</a>."There would be a sufficient amount of liquidity right there to cover if 100% of our bank's deposits ran off," he said. "Without having to sell a single security."In such an event, Schwab could collect interest on bonds it owns, borrow from the Federal Home Loan Bank, and issue certificates of deposit, he added.A Schwab spokesperson later said Bettinger was referring to client allocation decisions within Schwab and not clients pulling money from the institution and going elsewhere.In recent weeks, clients have actually been pouring more money into Schwab. From March 10 to March 16, the brokerage saw <a href="https://markets.businessinsider.com/news/stocks/charles-schwab-deposits-client-assets-17-billion-bank-crisis-svb-2023-3">a $16.5 billion increase in core net new assets</a>, even as the banking crisis spiraled from the US to Europe.As the collapse of <a href="https://www.businessinsider.com/svb-failure-what-the-hell-happened-2023-3">Silicon Valley Bank</a> spread contagion fears to other regional banks and Charles Schwab, Bettinger previously has said the company is totally unlike SVB with <a href="https://markets.businessinsider.com/news/stocks/charles-schwab-ceo-bettinger-clients-deposits-4-billion-svb-panic-2023-3?_gl=1*1v3m5xi*_ga*MTMxNDIwNDI1Ni4xNjc1Njg3OTU4*_ga_E21CV80ZCZ*MTY3OTMzNjY3MS4xMDMuMS4xNjc5MzM4NDM1LjYwLjAuMA..&amp;utm_medium=ingest&amp;utm_source=markets">brokerage and banking operations that are separate and both well capitalized</a>.Still, like SVB and many other banks, Schwab invested large amounts in long-term bonds, which have crumbled in value amid sharp interest rate hikes over the past year. By the end of 2022, Schwab had more than $11 billion in losses on its bond portfolio, compared to tangible common equity of just over $6 billion, according to the Journal.But Bettinger said that Schwab has around $100 billion in cash flow on hand and the means to raise more than $300 billion via FHLB loans and the Fed's new liquidity program that was set up after SVB failed."Many times, when you're in a crisis, there's very little you can do," he said. "It all comes down to what actions you had taken in preparation for that. We felt we had already prepared for this type of thing."Despite the recent inflow of client funds, Schwab's deposits shrank 17% last year to $366 billion.Bettinger said that isn't because customers are leaving Schwab, but simply moving their money into <a href="https://markets.businessinsider.com/news/stocks/bank-crisis-depositors-500-billion-svb-jpmorgan-fdic-insurance-regional-2023-3?_gl=1*11wutjm*_ga*MTMxNDIwNDI1Ni4xNjc1Njg3OTU4*_ga_E21CV80ZCZ*MTY3OTU4NDUzMC4xMTMuMS4xNjc5NTg2OTYyLjU5LjAuMA..">money-market funds</a> and high-yield investments within their accounts. "Clients aren't moving bank deposits out of Schwab," he said. "All they're doing is realigning their investments, as they should."Editor's note: The article and headline have been updated to reflect new information from the company.

Charles Schwab has enough liquidity if all bank deposits 'ran off,' CEO says

<ul class="summary-list"><li>Bill Ackman said a plan to deposit $30 billion into First Republic Bank creates a "false sense of confidence."</li><li>He said the banking crisis is beyond what the private sector can solve on its own.</li></ul>Billionaire investor Bill Ackman has criticized <a href="https://markets.businessinsider.com/news/stocks/first-republic-bank-svb-morgan-stanley-jpmorgan-talks-financial-aid-2023-3" target="_blank" rel="noopener noreferrer">a plan by 11 US banks</a> to deposit $30 billion into <a href="https://markets.businessinsider.com/stocks/frc-stock?utm_medium=ingest&amp;utm_source=markets" target="_blank" rel="noopener noreferrer">First Republic Bank,</a> or FRB, saying it creates a "false sense of confidence" in the San Francisco lender.<a href="https://www.reuters.com/article/global-banks-first-republic-bank-idTRNIKBN2VI1HV">Treasury Secretary Janet Yellen</a>, a former Fed chair, has apparently pushed the big Wall Street banks to "recycle" some of the deposits they have received from First Republic, by putting the billions back into the lender, Ackman <a href="https://twitter.com/BillAckman/status/1636569513469652993?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1636569513469652993%7Ctwgr%5Ec13888208239b52fbd4ef32a275e5b7255e847c5%7Ctwcon%5Es1_&amp;ref_url=https%3A%2F%2Fwww.businessinsider.com%2Fpost%2Fpreview%3Fpost_id%3D64143280a5f1ba790041dd04mode%3Ddesktop" target="_blank" rel="noopener">said in a long tweet on Thursday</a>."The result is that FRB default risk is now being spread to our largest banks," the founder and CEO of hedge fund Pershing Square Capital Management added. "Spreading the risk of financial contagion to achieve a false sense of confidence in FRB is bad policy," he said. He is instead calling for a temporary systemwide deposit guarantee immediately. The US has guaranteed access deposits at the collapsed <a href="https://www.businessinsider.com/how-silicon-valley-bank-imploded-2023-3">Silicon Valley Bank</a> and <a href="https://www.businessinsider.com/signature-bank-shut-down-by-regulators-depositors-bailed-out-2023-3">Signature Bank, New York,</a> but the <a href="https://www.businessinsider.com/personal-finance/fdic" rel="">Federal Deposit Insurance Corporation</a> only insures up to $250,000 per account owner, per ownership category. "We are beyond the point where the private sector can solve the problem and are in the hands of our government and regulators," he said.Ackman said he has no investments in the banking sector but was just "extremely concerned about financial contagion risk spiraling out of control and causing severe economic damage and hardship.""I have said before that hours matter. We have allowed days to go by. Half measures don't work when there is a crisis of confidence," tweeted Ackman.The collapse of <a href="https://markets.businessinsider.com/news/stocks/silicon-valley-bank-failure-fdic-wall-street-regulator-finance-investing-2023-3" rel="">Silicon Valley Bank</a> and <a href="https://www.businessinsider.com/signature-bank-shut-down-by-regulators-depositors-bailed-out-2023-3" rel="">Signature Bank, New York</a> has rattled the banking sector, sparking fears of a contagion that could lead to the next global financial crisis.Both banks were shut after a run on deposits, which drove fears that <a href="https://www.businessinsider.com/silicon-valley-bank-svb-first-social-media-bank-run-2023-3" rel="">the panic</a> could also cause a run on <a href="https://markets.businessinsider.com/news/stocks/silicon-valley-bank-run-collapse-contagion-failure-bailout-financial-crisis-2023-3" rel="">other regional banks</a>. Consumers are now <a href="https://markets.businessinsider.com/news/stocks/svb-collapse-silicon-bank-valley-jpmorgan-wall-street-depositors-2023-3?_ga=2.202270355.366464223.1678856528-1306638491.1633320106" rel="">moving their deposits from smaller to larger banks</a>, such as Bank of America, Citigroup, and JPMorgan Chase, the <a href="https://www.ft.com/content/2b580939-a4b6-48d2-8eb6-629b4cb1e06c" target="_blank" rel="nofollow noopener">Financial Times</a> reported on Tuesday, citing sources familiar with the matter.First Republic has been assuring customers of its liquidity since the <a href="https://www.businessinsider.com/how-silicon-valley-bank-imploded-2023-3" rel="">implosion of Silicon Valley Bank</a> — which in turn triggered concerns about the <a href="https://markets.businessinsider.com/news/stocks/regional-banks-stocks-svb-collapse-market-analyst-grant-2023-3" rel="">financial health of regional banks.</a> On Sunday, First Republic said it was getting <a href="https://www.businessinsider.com/first-republic-liquidity-jpmorgan-fed-bank-run-svb-svfg-2023-3" rel="">$70 billion of additional funding from</a> the Federal Reserve and JPMorgan Chase after its share price slumped sharply.But <a href="https://markets.businessinsider.com/news/stocks/svb-first-republic-bank-credit-ratings-downgrade-junk-fitch-frc-2023-3" rel="">ratings agencies S&amp;P Global and Fitch</a> still cut the lender's credit rating on Wednesday due to concerns that depositors could pull their funds.<a href="https://markets.businessinsider.com/news/stocks/first-republic-stock-bank-crisis-svb-wall-street-rescue-2023-3">First Republic Bank's shares</a> closed 10% higher at $34.27 apiece on Thursday and were 6% lower in pre-market trade at 5.41 a.m. on Friday. The stock is down 72% so far this year.

Billionaire investor Bill Ackman says US banks depositing $30 billion into First Republic creates a 'false sense of confidence'

<ul class="summary-list"><li>Jim Bianco urged regulators to offer unlimited insurance on bank deposits after SVB's collapse.</li><li>The analyst said regulators needed to repeat their 2008 move because "$250k is a made-up number."</li></ul>Jim Bianco <a href="https://www.businessinsider.com/janet-yellen-concerned-about-silicon-valley-bank-depositors-meet-needs-2023-3">urged regulators</a> to offer unlimited insurance on bank deposits as they did in 2008 because "$250k is a made-up number."Bianco, who runs Chicago-based Bianco Research, <a href="https://twitter.com/biancoresearch/status/1634885127179325440?s=20">tweeted</a> what he believed needed to happen <a href="https://www.businessinsider.com/silicon-valley-bank-svb-particularly-scary-bank-failure-why-2023-3">following the collapse</a> of Silicon Valley Bank Friday.The Federal Deposit Insurance Corporation (FDIC) <a href="https://markets.businessinsider.com/news/stocks/silicon-valley-bank-failure-fdic-wall-street-regulator-finance-investing-2023-3" rel="">took control of SVB after California regulators </a><a href="https://markets.businessinsider.com/news/stocks/silicon-valley-bank-failure-fdic-wall-street-regulator-finance-investing-2023-3" rel="">shut it down </a>when a failed $2.3 billion capital <a href="https://www.businessinsider.com/svb-failure-what-the-hell-happened-2023-3">raise sent its stock crashing</a>. The agency protects deposits of up to $250,000. However, Bianco urged the FDIC to "raise the deposit insurance ceiling to unlimited as they did this in 2008. Besides $250k is a made-up number anyway. So make up a bigger number."He also said banks should raise the interest they paid on deposits rates to 3% or 3.5% immediately: "This way the public gets the message that you money is safe, no matter the bank, or the amount, and the rate paid on your money is at least competitive with other alternatives.""This is not a solvency crisis like 2008. Bad loans or poor investments were not made. Money was not lost. So, everyone is going to get their money back," Bianco emphasized at the beginning of his post. However, the advent of online banking meant that depositors could very easily move their money and demanded instant liquidity, he added. "This should scare the hell of bankers and regulators worldwide."Bianco didn't immediately respond to a request for comment from Insider.

Jim Bianco tells regulators to offer unlimited insurance on bank deposits like they did in 2008 because '$250k is a made-up number'

<ul class="summary-list"><li>Raising the FDIC's insurance limit in the aftermath of SVB's crash might not be a catalyst for a stock market rally. </li><li>Barclays notes there have been seven times since the 1930s that the insurance coverage cap was increased. </li></ul>Regulators stretching beyond the FDIC's $250,000 insurance limit to protect accounts at failed Silicon Valley Bank and Signature Bank appeared to dampen contagion risks but Barclays says raising that coverage cap may not spark a sustainable rally in stocks."What if FDIC insurance cap was lifted? Equity investors should not hold their breath," Anshul Gupta, a global equity derivatives strategist at Barclays, wrote in a research note published Tuesday. While the banking crisis appears to be increasingly under control, it wanted to look at the impact a potential raising of the FDIC limit would be on equities, the investment bank said. "Could this catalyze a broad rally in risky assets? Historical evidence is evasive at best," said Gupta. The $250,000 limit has been on the collective mind of Americans after the first bank seizures since the global financial crisis. Senator Elizabeth Warren, part of the Senate Banking Committee, said last month it would be "<a href="https://www.cbsnews.com/news/elizabeth-warren-face-the-nation-transcript-03-19-2023/" target="_blank" rel="noopener">good move" to raise the insurance cap</a>, suggesting a potential range of $2 million to $10 million.<a href="https://www.bloomberg.com/news/videos/2023-03-30/fdic-insurance-should-be-raised-mnuchin-says-video?sref=GUP2BhaG" target="_blank" rel="noopener">Former US Treasury Secretary Steven Mnuchin</a> also said coverage should be raised and <a href="https://www.nytimes.com/2023/03/14/business/maxine-waters-fdic.html" target="_blank" rel="noopener">Representative Maxine Waters</a>, the top Democrat on the House Financial Services Committee, said Congress should think about bumping up the limit.Even <a href="https://markets.businessinsider.com/news/stocks/giannis-antetokounmpo-nba-bucks-lasry-bank-accounts-fdic-deposit-insurance-2023-4">NBA star Giannis Antetokounmpo </a>said as a rookie, he spread his money across a number of banks because of the FDIC's insurance limit. Barclays looked at seven times the FDIC coverage limit was raised since the 1930s and found the S&amp;P 500 usually experienced negative returns ahead of such moves, suggesting limits are typically pushed higher in response to a crisis. "In the immediate aftermath of the limit increase, S&amp;P experienced wildly different paths, suggesting that raising the limit was not always successful in soothing the equity market," Gupta wrote. Stocks ultimately posted strong recoveries, with Barclays finding the S&amp;P 500, on average, posted a 22% gain in the year and a half after the FDIC lifted the insurance cap. That was in line with long-term expectations given the poor returns ahead of coverage increases, it said. "However, there's no evidence that the limit raise itself catalyzed the move. Indeed, the eventual relief rally is in line with what is expected given the magnitude of the fallout preceding the insurance cap lift," Gupta said.FDIC insurance limits took place in July 1934, six months after the FDIC was established, September 1950, October 1966, December 1969, November 1974, March 1980, and October 2008, during the height global financial crisis, according to American Deposit Management Co., a treasury management and financial services company.The S&amp;P 500 scored a 3.5% increase in March, even as the SVB and Signature Bank failures rocked the banking industry. Big Wall Street banks rushed in with a <a href="https://markets.businessinsider.com/news/stocks/first-republic-bank-svb-morgan-stanley-jpmorgan-talks-financial-aid-2023-3">$30 billion rescue package</a> for <a href="https://markets.businessinsider.com/stocks/frc-stock?utm_medium=ingest&amp;utm_source=markets&amp;utm_medium=ingest&amp;utm_source=markets">First Republic Bank</a>. On Tuesday, <a href="https://markets.businessinsider.com/news/stocks/jamie-dimon-banking-turmoil-fed-rate-hikes-recession-2023-4">JPMorgan CEO Jamie Dimon</a> cautioned the turmoil in the US banking system wasn't over yet.<div type="image" title="Historical S&amp;P performance chart surrounding increases in FDIC insurance caps" height="718" width="1562" msid="99249243" hostid="261" sizebytes="82030"></div>

You Searched For "bank deposits" and got 9 results

Simply Put: A Deposit Dilemma — What's the fuss about a crisis in Indian bank deposits? Are mutual fund investments to blame?

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Charles Schwab has enough liquidity if all bank deposits 'ran off,' CEO says

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Billionaire investor Bill Ackman says US banks depositing $30 billion into First Republic creates a 'false sense of confidence'

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Jim Bianco tells regulators to offer unlimited insurance on bank deposits like they did in 2008 because '$250k is a made-up number'

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There's no evidence higher FDIC insurance would spark a big jump for stocks even as markets cheer government support for bank deposits, says Barclays

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