Industrial Development Bank (TASE: INDD.GG) shares are crashing as the run on the bank picks up momentum, despite government assurances of backing for the beleaguered loss-ridden institution.

Some 200 customers have hit the bank on Weizman Street, Tel Aviv, Tuesday morning to withdraw their money, in terror that the bank will close down, despite management pleading that they have nothing to worry about.

Inspired by media reports of the bank's problems, the customers are worried that it will collapse and that they will lose their money.

"I got here at 7 in the morning. I was first in line," one customer told TheMarker. "I went to the clerk and asked to withdraw my money. They tried to persuade me I had nothing to worry about. That my deposits are fully backed by the government, but I don't believe anybody in this country any more. They told me Id have to pay an NIS 100 fine for breaking my savings account, but Id rather have my money in hand than lose the whole thing. It's like you go to the bakery to get bread and see a long line. They tell you don't worry, there's plenty of flour in the storeroom and then an hour later come out and say, sorry, all gone."

The bank's top management is trying to persuade the people not to withdraw their money, using three main claims. One is that Industrial Development Bank is Israel's seventh-largest bank. Another is that the government has pledged to guarantee deposits. The third is that Israel's three biggest banks Bank Hapoalim (TASE: POLI ) , Bank Leumi (TASE: LUMI ) and Israel Discount Bank (TASE: DSCT) are all major shareholders in it.

Some of the customers have been persuaded to leave their money at the bank, but others prefer to pay the fine of breaking savings prematurely.

"A year ago I transferred all my money from Bank Hapoalim to Industrial Development Bank because I got better interest rates," said another customer. But now I want my money back while I can still get it in Argentina the government told the public that everything would be okay, and then they said oops, no more money.

Gmul, an institutional investor, has pulled out NIS 140 million, leading a customer to ask, "If Gmul's getting out, who am I to stay?"

Industrial Development Bank's spanking new chairman, less than two weeks in power - Ra'anan Cohen tried yesterday to instill calm, telling customers they had nothing to fear.

At mid-day Industrial Development Bank shares, all four kinds, are down 43%, on low turnover of NIS 300,000.

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