Why Are The World’s Most Powerful Banks Bankrupt How Much Will This Affect India?

Bank Crises: For the last three years, the world is in the grip of Corona. People still haven’t fully recovered from it. This year i.e. in 2023, it was expected that the world would come out of this pandemic and the world’s economy would start running back on track. It was being speculated that people would get jobs, but then the recession engulfed the world. Its effect is being seen in some countries. How will be the situation going forward? Time will tell, but in today’s era, it will take many years to recover the losses caused by the recession that has hit the global market and banking sector. After the sinking of America’s Silicon Valley Bank and Signature Bank, the news of bankruptcy of Credit Suisse has also come. Now to save these banks, other private banks are buying or are preparing to buy them. What will be its effect on the economy? Why are the governments not coming forward openly in these matters? And which banks have been dealt with by other private banks so far? The most important thing in all this is that how did these banks reach on the verge of collapse? We will try to know the answers to all these questions in today’s story.

Why did such a situation come?

Startups there had deposited money in American banks. Amid economic instability, startups started withdrawing money. The bank had no money. For this, those banks had to sell the bonds they had bought. There was a loss of about Rs 15,000 crore in selling the bonds. In fact, banks buy bonds issued by the government with the money deposited. So that over time they can earn from that money. The US government had reduced the interest rate on bonds due to inflation and recession, due to which the banks had to incur losses on selling the bonds. After this banks issued a cash issue of 20,000 crores. Due to this, the news spread in the market that banks do not have money and its effect was on the shares of those banks. These banks were declared bankrupt in no time. In the list of bankrupt banks, not only one bank, but two of America’s and Europe’s largest bank Credit Suisse has also been included.

Why are big private banks buying drowned banks?

To bail out Credit Suisse from the crisis, Switzerland’s largest bank Union Bank of Switzerland has announced its acquisition. UBS has announced the acquisition of Credit Suisse for $3.24 billion. New York Community Bank has decided to buy a major stake in the bankrupt Signature Bank in the US for $ 2.7 billion. According to a Bloomberg report, plans are underway to buy Silicon Valley Bank by another private bank, First Citizen Bank. This is happening so that they can be saved. The main objective behind saving these banks is to maintain the trust of the customers on the banking sector, so that they do not withdraw their money from any other bank. It is believed that as long as the customers have faith in the bank, they keep their money deposited in that bank. If all the customers start withdrawing their money at once, then the country’s economy will collapse along with the banking system. Although the US government has assured that the depositors depositing in the bank will get full money.

This has happened in India too

In 2020, when the news of bankruptcy of Yes Bank, one of the then largest private banks in India, came, SBI had invested in it. That year 49 per cent shares of Yes Bank were bought by SBI. Then the government had to come forward and guarantee the security of the money deposited in Yes Bank. However, now SBI has only 26.14 per cent stake in Yes Bank. Let me tell you, at that time other private banks of India also came forward to save Yes Bank, which included Axis Bank, Kotak Mahindra Bank, HDFC Bank and IDFC Bank.Why Are The World’s Most Powerful Banks Bankrupt?.

What will be its effect on the economy?

America’s economy is the strongest of any country in the world. Many countries of the world do business in the US dollar. When there is a major change in the American stock market, it affects many countries of the world. India is also included in that. Due to the failure of the banking system of Europe including America, the stock markets around the world are running at a loss. If we look at the report of the United States Stock Market Index for the last one month, it is found that the market is trading at 32181.77 with a fall of 475 points. This is affecting the Indian market in a big way. In the last one month, the Indian market went down by 3,043.77 points to 57,628.95. When there is a continuous loss in the stock market, companies change the prices of their products to manage their losses, which directly affects the pocket of the general public. Gradually, it weakens the economy and inflation starts increasing, due to which the common man starts doing trahimam-trahimam.Why Are The World’s Most Powerful Banks Bankrupt?.