Even if you assume no one puts a single additional rupee as deposit into Hdfc.
I suspect hdfc Bank can raise funds via ncd etc at a cheaper rate than the new age fintechs.
When I am looking for a loan, I don’t care much which company lend me money. (Money is fungible) but when I am going to lend money (or deposit money which is also lending to the bank even though they don’t say it out loud) I very much care about the stability and reputation of the bank.
As far as I know, India doesn’t have a deposit insurance like the US (what’s called FDIC). FDIC in the US covers up to 250k of deposit per account. If a bank goes bust then anything more than 250k is potentially lost. This would potentially mean that I shouldn’t really care which bank I keep my money as long as it’s below 250k. But I still choose a reputed bank since I don’t want to go thru any angst of getting the money thru the deposit insurance scheme of shit hits the fan.
Even the FDIC in the US is funded by every bank making a contribution. It assumes some banks going bust. But if many large banks go bust, then even the FDIC wouldn’t be able to pay everyone I think. All insurances must assume some base case and some worst case scenario.
Back to Indian banking, I think someone told me about 1lk is guaranteed beyond that it’s possible to lose it a bank goes under. So it’s best to keep money in PSB or very reputable private banks (even there over might distribute between multiple banks). I would never deposit any money in any of the fintechs even if they were taking deposits.
During the 2008 financial crisis, ICICI was very close to collapse. You can read about it. Although the bank officials will never acknowledge these things because it’s all based on confidence.
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