Question

I want 250 words essays as to how COVID - 19 will lead to various losses in Bank owing to Market Risk, Credit Risk, Operational Risk, Liquidity Risk, ALM risk, Capital Adequacy risk, Resilience risk and so on. (In Indian Context).

(NOTE: I WANT A good and well explained answer. no plagiarism)

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Answer 1

Spread of Covid 19 lead to lockdown in the country Which stop each and every economic activities in the country. Due to stopping of industrial and other production activities new credit is not generate as well as old credit may also have a chance to converte into non performing asset .saving of the household , firms etc are at its owest level and new deposits are also not coming in the banking system as well as people also started to withdrawl their money in awake fear of corona. Due to government welfare scheme, like direct benifit transfer,for better ment of people during fight with covid 19 ,which has also increases bankig sector operational cost in comparison with iheir business activities and other essential expenses (bonus) to their staff s. Bank are not lending thus asset are not creating, but liablities of old deposit already exits. And thus liquid crunch May occur in banks becoz people are mostly preferring to withdraw ,more than depositing in the system.

Thus we can say that market risk increase because of no economic activities and no production thus slowdown already , credit risk as new credit is not generating and households,firms demand is lower level for credit, operational risk due to increasing operational cost compare to other banking activities, liquidity risk in banking due to cash and online withdraw of money, new asset is not creating but liability already exit becoz old deposit of people , capital adequecy all in risk due to chance of increment in NPA and less secured asset, cash (tier 1 capital) etc. and these all increase resilience risk of banking system.