The truth about ICICI Bank

Hope this helps J

There have been innumerable rumours in the past few days about the health of India's second largest bank by assets- ICICI Bank. Few mini bank runs have also been reported at ICICI branches across the country with anxious depositors trying to withdraw all their monies from its ATMs. This email message intends to report the actual state of affairs at the bank and Indian Banking system as a whole.
 

1.      Is my money safe in ICICI ?
Absolutely.
 

2.      Give me substantiation for the same ?

A bank collects deposits from common public paying an interest to the latter and lends or invests the same at a higher interest rate to entities who are in need of the same.

For every 100 rupees collected as deposits from common public like you and me,
 

·         8 rupees have to be deposited as hard cash with RBI as reserve back up.

 

·         25 rupees have to be  invested in gilt edged Govt of India bonds bearing interest. Govt of India can never default on this money as all they need to do to return this money in the worst case would be to print Mr MK Gandhi on paper.
 

·         So while 33 rupees (25+8 mentioned above) is safe with the government, bank can now lend for interest, the rest of 67 rupees to people who need money. All our personal, car and home loans are taken care by these 67 rupees.

 

·         Atleast 6.7 rupees has to be put in as capital by the owners (share holders) of the bank. ICICI bank's owners have actually put in 9 rupees from their pockets. The owners don't have any rights on this money once they have put in and can claim back any part of this 9 rupees only when they have paid all the depositors.
 

3.      What does all this arithmetic mean. I am still not clear ?

This means 42 out of 100 rupees of our hard money which we deposited in ICICI is indisputably safe. Problems with the rest of 58 rupees arise only when the people who have borrowed 67 rupees from the bank decide not to pay back the bank. A situation where in all 67 rupees are not paid back never arises. 1 or 2 rupees might not be paid back sometimes but owners of the bank take care of this contingency by contributing 2 rupees of the profit they made while running the bank. In case of ICICI bank, this figure of 1 or 2 rupees has suddenly increased as some entities like lehman brothers which took money from the bank, defaulted.
 

4.      But ICICI is known for its tough guy collection tactics. Could n't they collect the money back from this Darren lehman or whatever guy?

In this case ICICI's extortionary goon tactics did not work out as lehman brothers and his friends had employed Wall Street mafia to counter ICICI's desi goons.
 

5.      I am not still convinced. I don't want to lose any part of my hard earned money. So I will go to nearest ICICI ATM and withdraw all my money.

That will be suicidal. Consider this example. You take a personal loan and you are to pay back the bank in EMIs over a period of 5 years. What if, after 5 months the bank suddenly demands all of money you owe it in one instalment. You don't have that much money instantaneously and the bank declares you bankrupt. Are you really bankrupt – common NO. You have a decent job, earn handsome salary, and you can definitely pay back the bank if it was in EMIs. You are bankrupt and cannot pay only if you have to pay all of the money in a single instalment.

This is exactly what happens when all of us go to ICICI ATMs on a single day and ask all of our money back. Poor ICICI gets bankrupt and the situation only worsens. This is called termed as "Run on the bank"
 

6.      But what happens to my money in case this Run on the bank thing unfortunately happens ?
Government has provided for insurance in that case. Government will return money to all of us, albeit upto a limit of 1 lac   rupees each.
 

7.      So what do I do finally.

Do not trust the rumours being spread by SMS text  and email messages predicting the end of ICICI bank. Some people just want to play prank and create panic, that's it. Carry on with you daily business with out worrying while our money is in safe hands of RBI and Finance ministry, as India has one of the best regulated banking systems in the world.

And yeah finally, do forward this message to as many people as possible to spread awareness. Divine intervention or help from heavens has not yet been seen as a result of forwarding, but in case such a phenomena is observed, do not hesitate to blow the whistle.