The saying, “As safe as a bank” is no longer true. The recent collapse of a number of banks proves this. So how can one find whether the bank is sound or not? Watch out for the following indicators, all of which you can find in your bank’s quarterly results, in its annual report and at its website.
Find out, if your bank is making profit? Steer clear of loss-making banks.
Has your bank been paying dividends to its shareholders regularly? Only when profits are healthy and there is money to spare, will a bank pay regular dividends.
Non – Performing Assets or NPAs, are loans on which borrowers have not paid their dues- principal and interest- for 90 days or more. If a banks NPAs are more than 3% of its total loans, that bank is not healthy. It can get into trouble at any time, especially if it is a private or cooperative bank. A sudden rise in NPAs is also a warning sign.
If your bank offers you deposit interest rates that are much higher than other banks, it is probably not good. A sound bank does not need to attract depositors this way.
Public – sector banks are safe, as they are backed by the government. So are major private banks run by multinationals. Cooperative banks can be relatively less safe.