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Commentary

Deposits flying to safety

The lure of guaranteed deposits is here. First, Ireland guarantees all deposits (upto 400 billion euros) at its banks. Then Greece butts in and says me too.

Now NRIs are getting their money over to India as banks here aren’t quite as leveraged and are largely safe (at least the public sector fellows). Interestingly while Indian banks don’t have an FDIC like structure – the RBI guarantees 100K rupees worth of money in all accounts. But then the government owns a large chunk of banks like SBI, PNB, Syndicate/Canara/Corporation Bank etc. and there might be a depositor cushion there.

If this is the trend going forward, every country is going to want to guarantee it’s bank deposits – otherwise capital will move to safety. Either that, or Ireland is going bust.

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