Indian households, looking for a safe space to put their money in, have been hurtling from crisis-to-crisis past few years. Banks have failed, debt funds saw uncharacteristically deep losses and in March 2020, we saw six debt funds frozen. People who trusted nobody and kept cash under the mattress, lost it during demonetisation.
The latest story that is spooking bank depositors is the moratorium on their money in Lakshmi Vilas Bank (LVB), ahead of its amalgamation with DBS Bank. LVB is a small bank and the impact on overall banking will be marginal, but the loss of confidence in banking escalates with every crisis. And banking is all about the trust that your money will be there when you need it.