How Safe is Your Money in the Bank

In Malaysia, there is a system established by the Government to protect depositors against the loss of their insured deposits placed with member institutions in the event the member institution fails. It is administered by Perbadanan Insurans Deposit Malaysia (PIDM) and brought into effect in September 2005.

All types of depositors, whether businesses or individuals are protected. The maximum limit of coverage is RM250,000 per depositor per member institution.

Your deposit with member banks is covered automatically and it is free. When you have one million Ringgit you can deposit with four different banks and not four different branches of the same bank at RM250,000 each to get effective cover. 

Your money may be safe in the bank but is it productive? There are two factors to consider:

·     Internally

 Interest in saving accounts and fixed deposits are so low that it is impossible to keep up with inflation. It means you need to fork out more money to buy the same item as time goes by. For the money you keep in the bank it is worthless and less over time.   

·         Externally

Malaysia’s credit rating according to Standard & Poor is A-. It means Malaysia has a strong capacity to meet financial commitments, but somehow susceptible to adverse economic conditions and changes in circumstances. In case of a negative revision in credit rating, the exchange rates for the Malaysian Ringgit against other currencies will be weakened. It means your need to pay more of your money to exchange for the same amount in foreign currency. As an example, the exchange rate for 1 US dollar is RM3.22 as at December 13, 2011. If there is a negative revision of our credit rating because of adverse economic conditions, you may need to pay more than RM3.22 to get one US dollar.  On the other hand, the Malaysian currency will appreciate against other foreign currencies if there is a positive revision of our credit rating.      

You can view Standard & Poor's Credit Rating for each country here. 

It is advisable to keep your money in the bank for emergency purposes only. You need other investment vehicles to grow your wealth and beat inflation and currency fluctuation.