Big Borrower Beats Banks: Is Your FD Safe?

When courts approve a debt resolution plan that banks reject, lenders like HDFC and Union Bank lose thousands of crores. Here's what that means for your deposits, loan rates, and the banking system you trust.

Here's what happened: Union Bank of India, Canara Bank, and LIC Housing Finance rejected a court-approved insolvency resolution plan for a major corporate borrower, calling the recovery terms unacceptable.. HDFC Bank had already moved to challenge the NCLT's approval of the same plan, marking an unusual coalition of public and private lenders opposing one resolution outcome.. Under India's Insolvency and Bankruptcy Code, if a resolution plan gets NCLT approval, dissenting creditors must still accept the terms — making legal challenges the only recourse..

What you should do: Check your bank's Gross NPA ratio in its latest quarterly results — anything above 3% signals meaningful stress on the loan book that can affect deposit rates.. Diversify fixed deposits across at least two different banks rather than concentrating all savings in one, so one bank's NPA trouble doesn't hold your entire corpus.. Compare FD rates across small finance banks and Post Office schemes — when PSU banks take large haircuts, their FD rates often lag private banks and Post Office by 0.5–1%..

If your bank is a major creditor in a high-profile insolvency case, watch its provisioning coverage ratio (PCR) — a PCR below 65% means future losses could still hit its profits and your deposit rates.