Question

Covid-19 has brought about a lot of challenges to global economy and finance sector in particular. As a banking consultant you’re to identify various risk associated to this problem and provide a strategic solutions as to how your bank can mitigate it.

Answer 1

Corona Pandemic has severely affected all sectors of the economy especially Banking Sector. Following are its ill impacts on:

1. Existing Retail Borrowers: In current situation of job loss and salary cut, it would be very difficult for middle class borrowers to server their car loan, home loan, personal loan EMIs in near future. Although RBI has given 3 months moratorium but it would not be enough.
2. Existing SME Borrowers: MSMEs have been worst hit by the pandemic as their businesses have come to standstill and income generation has come to zero. They will not be able to survive if demand in the economy does not revive.
3. Fresh Credit Creation: It would be difficult to lend in this environment as people will not try to make invest in assets or start new businesses because of ‘fear of unknown’ and instability.
4. NPA: Banking Sector is looking to a NPA storm as industrial activity has come to a standstill and it will create bad loans in near future. With IBC suspended for next 1 year, Bank’s will not have any legal tool with them to improve their asset quality.
5. Digital Super Wave: Banks although were already driving Digitalization in a big way but this pandemic will give a strong push in this direction as people will choose Digital over regular Banking. Digital Banking is going to become a new normal.
6. Alternate Channels: Bank’s alternate channels would become stronger and wider. ATMs, Online Banking, Digital loans, Online FD etc will take a front seat.

I hope that this pandemic will make everyone of us stronger and wiser. Mankind will win this battle too.