415. Is my money safe in

Indian Banks . . . Have NRE FDs

with Dhanlaxmi Bank

Questions: Dear sir I have a query on a specific bank in India. I am an NRI and I have placed NRE FDs with Dhanlaxmi Bank. I read about some issues in Dhanlaxmi Bank and both, the CEO & MD have quit. Also heard that staff salary is being cut by 40% !!! Could you please advise whether the bank is still a stable institution and depositors' monies are safe (over the insured amount of Rs.1 lakh)? Or is it prudent to close FDs & move the money to a safer bank? Thanks for your candid response/advice. Regards Shashi Answer: When you say both the CEO and MD have quit, kindly note that there is only one person referred to here. The Managing Director and CEO of Dhanlaxmi Bank, Mr Amitabh Chaturvedi. According to news reports, his resignation was on account of differences of opinion with the board of directors. Resignation is not associated to any kind of fraud or problem at the bank. Dhanlaxmi Bank moved to a net loss of Rs 368.7 million in the third quarter against a net profit of Rs 72.6 million in the same period previous year. There are reports that the new management at Dhanlaxmi Bank, is looking to slash the salary of all its high cost employees by around 40% across different levels. This will bring down the banks expense by around Rs 40 crore. Credit rating agency Fitch Ratings has downgraded Dhanlaxmi Bank's subordinated debt, worth Rs 170 million, to 'BBB-' from 'BBB', citing the bank's weak earnings in the third quarter (Oct-Dec) of the current fiscal year 2011- 12 led by mounting expenses. I can’t answer your question as to whether the bank is stable. The bank insured amount is Rs. 1 lakh as you state in your email and cannot be over 1 lakh. What you should do with your money already in the bank as deposits depends on your comfort level. Breaking bank fixed deposit may mean loss of interest. Sometimes news reports can lead to anxiety, however lowering of credit rating, resignation of a CEO and a banks decision to control costs by cutting high end salaries may not mean that they are in financial trouble. However no one can offer any sort of guarantees here. When investing, don’t simply go by higher interest rates. You may be interested in reading an excerpt, provided below from an article published on November 4, 2011 by Moneylife, a personal finance magazine. RBI has also asked Dhanlaxmi Bank to strengthen its liquidity risk management and reduce dependence on high cost borrowing/deposits by March 2012, put a limit of 20% of total book for portfolio buyouts and submit a monthly report on performance of loan portfolio to its regional office in Thiruvananthapuram, Kerala, strictly adhere to directions issued under Section 35 (A) of the Banking Regulations Act and improve its accounting policies and implement good practices particularly in reference to booking of interest on bills discounted, accounting of intangible assets etc. You can read the full article by visiting: http://www.moneylife.in/article/rbi- directs-dhanlaxmi-bank-to-adhere-to-its- action-plan/21178.html