Question

ehat do you think would happen if all the depositers went to ask for money at the same time!?
challenge for meritbation experts

Answer 1

A situation where all depositors or most of the depositors want to withdraw their deposits from the bank at the same time would lead to a bank run. This situation has occurred in the past. It arises mainly due to rumours that the bank may become insolvent and default on payments. This leads to panic among depsitors who rush to withdraw their deposits. This large scale withdrawal causes further panic as it actually increases the likelihood of defaults. Thus, it becomes a self-fulfilling prophecy to the point that it may cause bankruptcy.