Invest in Credit Risk Mutual Fund or not?

We all deposit our hard-earned money in different banks under different schemes. We are always looking for a safe destination to park our money. But how secure are our savings? We should cross check it before taking any decision.

Over the past few years, more than a few cooperative banks have ended up in trouble and a few public and private banks also have also not been doing well. Here is a nine-point basic guideline to know how secure your bank and savings are.

Nine points

— Never keep all your savings in one single bank account. Split it into two-three accounts.

— Another way of ensuring safety is to stay away from banks with a high rate of bad loans. Bad loans are those which are never returned by debtors. Check the bank’s health before depositing any money. Bad loan over 10% of the entire credit given by a bank is a big signal of worry. Don’t ever put your money there.

— Please check the bank’s rating and financial health including RBI’s outlook about the bank before putting lump sums into it.

— One of the safest places to park your money is in government or some private bonds. Different organisations and governments raise debt through bonds. These government bonds carry negligible risk.

— Another route can be depositing your money into certificate of deposits where the funds are protected as in NSC or KVP or even long-term FDs.

— You can put your money mainly government guaranteed savings scheme like PPF, NSC, KVP etc.

— Go for money market mutual funds as they offer you the chance to enjoy capital preservation while earning a return.

— Keep faith in big PSU banks like SBI, PNB or Bank of Baroda and huge private banks like HDFC Bank, ICICI Bank or Axis bank, where your savings are protected.

— Try not to keep more than 5 lakhs in a single account because when a bank fails, the only respite a depositor has is the insurance cover offered by the Deposit Insurance and Credit Guarantee Corporation. Currently the insurance cover under DICGC is up to Rs 5 lakh.