Reserve Bank of India (RBI) has asked the all state governments not to move out their deposits from private bank accounts for such actions can have negative repercussions for the whole financial sector of the country, as per the letter sent by RBI to chief secretaries of all states.
"We strongly believe that such a move can have banking and financial sector stability implications,” the central bank said in this letter.
There were reports that some state governments were considering to transfer their deposits from private sector banks to public sector firms. RBI has cautioned against any such decisions, which could lead to stability implications for the whole financial sector, according to this letter.
The letter also urges to have faith in the competence of the central bank and ensures that RBI can effectively deal with any precarious hardships of banks. It further added that the money of depositor is entirely safe under the strict regulation and the authority of the central bank of India.
It is important to note that after the sudden crisis of Yes Bank, which is at present under the moratorium by RBI, there was an atmosphere of gloom as to the safety and security of the deposits in the bank. This fear still haunts people as well as some privates and government institutes about safety of the deposits in private bank accounts.
Addressing to the Yes Bank crisis, the letter said "It is precisely with a view to retaining depositors' confidence in private sector banks and mitigating their hardship that, after the imposition of a moratorium on Yes Bank Ltd, the RBI has drawn up a draft scheme without any delay and we are making every effort to expedite the finalization of the scheme.”
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