Why I keep Multiple Bank Accounts

In India, the government has recently (I guess in January 2020) introduced a bill stating that we all will have deposit insurance against a bank account

According to RBI,

Each depositor in a bank is insured up to a maximum of ₹ 5,00,000 (Rupees Five Lakhs) for both principal and interest amount held by him in the same right and same capacity as on the date of liquidation/cancellation of bank's licence or the date on which the scheme of amalgamation/merger/reconstruction comes into force.

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This insurance might be available in other countries too and it guarantees that whatever happens to the bank, for example, if it gets bankrupt, the amount will be fully refunded up to the deposit insurance.

Say for example in India, since we have Rs 5,00,000 deposit insurance and I had Rs. 4,00,000 in my account, I will get Rs. 4,00,000 back and if I have Rs 6,00,000 in my account I will get Rs 5,00,000 and everything above it will be lost.

This came to effect after we have seen a PMC bank fraud last year.

The fraud at the Punjab and Maharashtra Cooperative (PMC) Bank came to light in September 2019 after the Reserve Bank of India found that the PMC Bank had allegedly created fictitious accounts to hide over Rs 4,355 crore of loans extended to the almost-bankrupt HDIL.

The trick I follow is to have multiple bank accounts and divide my money into these accounts because of the deposit protection always applies per account and not all accounts. In India, we don't have any cap on the number of accounts an individual can have but I think 3 is the max you can keep because the more accounts you have more you have to manage.

I keep 3 bank accounts, one for Salary Credit, one for Savings only and one for Loan. Most of the expense transactions happen from Salary accounts, all the investments and savings are being done from Savings only account whereas all the loans related payment happens from the Loan account. This is my way of organizing it, but in none of the accounts, I keep more than Rs 5,00,000. Even if I have to keep more than it, I will always keep it in a Nationalized Bank, in my case it is SBI. It's nearly impossible for a nationalized as well as topmost government bank to go bankrupt even though I get less interest than others.

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This division also helped to save money from me. Though I am not a great spender, still I try to spend on a few luxuries here and there. The trick I follow is to spend most of my money in my savings account where I don't have net banking or debit card enabled so that there is no way I can get money from there. So it is like to send money and forget, and thus its best to take in much more money in than to take out money.

One more reason for choosing different bank accounts is to get advantages of multiple bank accounts. Every bank account has strength and weaknesses, and thus I try to take benefit from all using different strategies. If you want a loan, the nationalized bank has the lowest interest rate and thus I chose SBI to do my loan-related think. Axis bank has a provision of converting any surplus of money above Rs 25000 as an FD where you can withdraw at any point and thus getting slightly more than regular interest. Since a single account does not have all the benefits, it's always better to take accounts which have better.