Assignment 1 CB Vishal Vangwad Final

NIIT University, Neemrana
Mid Term Assignment No 1
Impact of COVID-19 on Banking Sector
Submitted by: Guided by:

Mr. Vishal Vangwad Prof. Mr. Anil K Singh Sir
PGDBRM (Term 1) Course: Commercial
Acknowledgement No: PD20-E02-849 Banking
Table of Content:
Sr. No. Title Page No.

1 Introduction 2
2 Major Impacts on Banking Sector 2
3 Negative Impact 2
4 Positive Impact 3
5 Challenges Rises for banking sectors 4

6 Conclusion 4
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1. Introduction
The worldwide spreads of COVID-19, the bank operations have been hampered. The
COVID-19 pandemic has severely impacted every industry across the globe in recent
months. As industries attempt to recover, there is a need for new strategic initiatives and
higher preparation. Banks and the wider financial services sector are facing multiple
challenges from the ongoing global impact of COVID-19. The outbreak of the COVID-19
pandemic is an unprecedented shock to the Indian economy. The COVID-19 impact on
banking will be severe fall in demand, lower incomes, and production shutdowns and will
adversely affect the business of banks. The situation is exacerbated by staff shortages,
inadequate digital maturity, and pressure on the existing infrastructure as firms scramble
to deal with the impact of COVID-19 on financial services. To managing the direct
economic impact of the coronavirus, banks need to have a plan. Many banks are already
starting to encourage remote working of some employees.
2. Major Impacts on Banking Sectors:

The economy has been extremely affected due to COVID-19 Pandemic. Reserve Bank of
India; the Apex bank of India made necessary changes with the help of expert in their
policy for facing COVID-19 pandemic. Entire Indian Banking sector faced and continue
to face many challenges such as liquidity issue, Reserve Bank of Indian reduced REPO
rate to name a few. Since people are struggling to receive income, Reserve Bank of India
decided to provide concession for paying EMI from customer by increasing the period for
re-payment. The research found that Indian Banking system has added various measures
due to COVID-19 Pandemic to make Banking system smooth and effective.
To understand impacts easily it divided into two parts:
3. Negative Impact:
a) Increase Credit risk defaults and lower recoveries:

Firms that have stopped working miss out on revenues, and therefore might not be
able to repay loans. Similarly, households with members who have lost their jobs
have less income, and therefore might not be able to repay their loans. Most of the
Indian Banks were facing the problem of NPA, non-recovery of loan, customer
frauds, Bad Loans.
b) Liquidity risk:
Reduced cash inflow from loan. Bank’s face increasing demand for credit, as
especially firms require additional cash flow to meet their costs even in times of no or
reduced revenues.
c) Profitability and capital adequacy:

Reduced profit levels and capital. Bonds, other traded financial instruments have lost
value, resulting in further losses for banks. Also, the open derivative positions that
have moved in unexpected directions due to the crisis.
d) Revenue Pressure:
Banks’s face lower non-interest revenues, as there is lower demand for their different
services.
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e) Increased fraud, cyber threats etc.:

Remote working conditions and adoption of digital channels have expanded the
attack. Surface of banks’ IT network with cyber threats. Trying to exploit any remote
access weaknesses.
f) Change in business process and financial ambitions:

Losses and lower capital buffers in banks can have negative spill over effects, which
might make banks’ solvency position even worse and might also undermine the
broader economy. IT infrastructure development and challenges
g) Customer service preference:

Concerns around continuity of processes which have direct touch points with the
customer but are still manually operated in bank branches that have been shutdown.
Straight-through processing will become an imperative given the remote working
conditions.
4. Positive Impact:
a) Digitalization:
Impulse to banking sector to transformation. Innovation and adoption gain speed due
to Covid 19; opening opportunities to reduce costs and boost revenues. Facilitate
digital transition to customers transformation of distribution channels help employees
adapt to the new way of providing services.
b) Lower regulatory Pressure:

Its Mitigate financial impacts and alleviate operational burden. Regulation flexibility
and very supportive towards alternative. Certainty regarding the coherent, interaction
and impact of regulations.
c) Monetary Policy Relief:

Low financial tensions and help financial stability. Banking systems which are very
dependent on net interest Due to current scenario Low interest rates for longer
Income will suffer the most. Regulators seem to favour further consolidation.
d) Government Support:
First, governments have provided firms and workers with direct payments to
substitute for their lost revenues. Second, there are direct support measures that
positively affect banks, including loan guarantees.
These different supervisory and fiscal policy measures have helped.
e) Relief Measures Announced by regulators

Reduction in CRR. Rescheduling of payment of EMI for loan.
Relaxation in NPA recognition norms
Changes in repo rate and reduced the fixed rate for liquidity adjustment. Rate cut
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f) New Entrants:
Fintech activity and ecosystems will likely expand at a faster pace due to the
pandemic. Large corporations are more likely (53%) to have fully embedded fintech.
g) Competitive Landscape
Promote of banking consolidation.
5. Challenges rises for banking sectors:

1) Increasing preference for distributed workforce shared services.
2) Raising need and preference for digital transactions.
3) Growing preference for health and life insurance policies.
4) Accumulation of surplus capital due to limited deployment opportunities
5) It is important for banks to differentiate between good costs and bad Costs.
6. Conclusion:
Financial Institution facilitate a conducive healthy environment to the employees and
reskilling of the employees on new processes for ways of working. They are
enhancing customer centric approach through digital channels. RBI frame the policy
for ensuring business continuity, engage in partnership to optimize process and
enhance experience. Reprioritize sectors and customer segment based on growth and
risk profile. Government encouraging people to design innovative business model for
the new industry environment. Focusing on build robust digital ecosystem leveraging
latest technology.
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NIIT University, Neemrana

Mid Term Assignment No 1

Impact of COVID-19 on Banking Sector

Submitted by: Guided by:

Sr. No. Title Page No.

5 Challenges Rises for banking sectors 4

2. Major Impacts on Banking Sectors:

a) Increase Credit risk defaults and lower recoveries:

c) Profitability and capital adequacy:

e) Increased fraud, cyber threats etc.:

f) Change in business process and financial ambitions:

g) Customer service preference:

b) Lower regulatory Pressure:

c) Monetary Policy Relief:

e) Relief Measures Announced by regulators

5. Challenges rises for banking sectors:

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