The global economic crisis has come to India. Share markets are down; industrial production is down and the mood among businesses and investors is down.

The Prime Minister, Finance Minister and the RBI Governor have repeated said India’s economy strong enough to weather the storm in the world financial market and it’s banks have enough money.“The fundamentals of the Indian economy have been strong and continue to be strong. The Indian banking system is sound, well capitalised and well regulated,” said RBI Governor D Subbarao yet again on Friday night.

Is India’s strong enough to weather the storm in the world financial market? Is your money safe? A CNN-IBN show hosted by Karma Paljor discussed this on Friday with CNBC-TV18’s Banking Editor Latha Venkatesh, leading market expert S P Tulsian, who is the CEO of, and Rajiv Bajaj, MD of Bajaj Capital.

Is your money safe ?

If a bank goes bust

Delhi resident Deven Mehta wanted to know what would happen to his money in savings account if his bank were declared bankrupt? “Is it true that the amount of Rs 1,00,000 is insured in the savings account of any bank?” he asked.

“Yes, an amount of Rs 1,00,000 is insured for every depositor. The rules of Indian commercial banks are such that they render depositors safe,” said Venkatesh.

“For every Rs 100 a bank collects as deposit, Rs 25 will have to be kept with the government as bonds. Governments cannot default, so Rs 25 is anyway safe. Another 8.5 per cent cash should be kept with the RBI, so that is safe again. Besides these there are other safeguards in the banking system.”

“Lehman Brothers lent 40 times its capital as loans and Goldman Sachs lent 27 times it capital but India is nowhere near that kind of cowboy lending,” said Venkatesh.

Safest bank?

As Indians feared for their deposits, the talk on the street was that public sector banks were safer. Is this true?

“Every institution should not be seen in the same light anymore. One should rate the credit-worthiness of an institution and even banks are subject to credit ratings. One should see the credit-worthiness of a bank and not whether it is public or private. I would keep my money in a Triple-A rated institution,” said Bajaj.

Should Indians withdraw their money from British banks? Is it the Indian government which guarantees savings in foreign banks?

Venkatesh’s advice was not to be scared, as the British government was doing its utmost to help its banks. “The British government has gone all out to reassure its banks in a big way. I assume that that assurance applies to branches in India. I think a scare (about British banks) is uncalled for. British banks is an umbrella term, one would have to refer to individual banks,” she said.

Staying invested

Bangalore resident Rakesh Kumar invested in the markets when the Sensex was at 20,000. “I can afford to remain invested for the next three years. Is my money safe or should I sell bearing a huge loss?” he asked.

Tulsian’s advice was: if you are an investor you must hold and if you are a trader you must sell. Now is a good time for people who have funds and are waiting to invest in shares.

Stocks of PSU banks, sugar stocks, pharmaceutical and FMCG companies look good for investment, he said.

It always the right time to invest—investors right now have to decide whether they want to preserve their money or use it to buy stocks which are normally unaffordable, said Bajaj.

“If I want to play safe I would probably put my money in gold mutual funds, which is a very good instrument to invest in this uncertain period,” said Bajaj.

Invest in equity funds and choose a large fund management house, which has lots off assets under management and a track record of at least 5-10 years. “Choose a large-cap and diversified fund. Whenever the market recovers, large and frontline companies will go up first, so invest in a large-cap fund,” said Bajaj.

Wait, watch and invest cautiously was the advice of the experts.

Excerpt From IBN