ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A bank run occurs when many customers withdraw all their money simultaneously from their deposit accounts with a banking institution for fear that the institution is, or might become, insolvent.

Detailed explanation-2: -Bank run (bank panic) A series of unexpected cash withdrawals caused by a sudden decline in depositor confidence or fear that the bank will be closed by the chartering agency, i.e. many depositors withdraw cash almost simultaneously.

Detailed explanation-3: -Bank runs happen when a large number of people start making withdrawals from banks because they fear the institutions will run out of money. A bank run is typically the result of panic rather than true insolvency.

Detailed explanation-4: -The banking system’s panic occurs when unforeseen events make depositors nervous and put their funds at risk. Reduced public confidence in the banking sector causes a drying up of available capital. The sudden and drastic reduction in accessible funds has the potential to trigger a catastrophic slump in the economy.

Detailed explanation-5: -It leads to a significant cash shortage, which pushes the bank into insolvency. Such financial distress usually occurs when the entity runs into a loss or cannot generate sufficient cash flow. read more. When multiple banks confront the same situation simultaneously, bank panic ensues, resulting in economic recession.