Impact of Covid-19 on indian Economy & Banking Sector Topics covered: - What is Covid-19 ((Corona Virus Disease) ? - Socio - Economic Effects of Covid-19 on global society. - How Covid-19 hit India? - Impact of COVID-19 on Indian Economy. - Impact of COVID-19 on Indian Banking Sector. - Steps to be taken by Indian Banks.

1. Impact of COVID-19 on
Indian Economy & Banking
Sector
Dr Praveen S
MBA, PhD.
Mob: 9029408903
Email: ppraveens65@gmail.com
Dt. 16/05/2020

2.  Topics covered:
 What is Covid-19?
 Socio - Economic Effects of Covid-19 on global society.
 How Covid-19 hit India?
 Impact of COVID-19 on Indian Economy.
 Impact of COVID-19 on Indian Banking Sector.
 Steps to be taken by Indian Banks.
16/05/2020

3.  What is COVID-19?
 COVID-19 is a disease caused by a new strain of coronavirus. 'CO' stands for corona, 'VI'
for virus, and 'D' for disease.
 It was first identified in December 2019 in Wuhan, China.
 Spread globally across 187 countries, resulting in an ongoing pandemic.
 As of 16 May 2020, more than 45.5 lakh cases have been reported across 187
countries and territories, resulting in more than 3.06 lakh deaths. More than 1.73 lakh
people have recovered.
 Low income individuals are more likely to contract the corona virus. The reason is that
poorer families are more likely to live in crowded housing and work in the low skilled jobs,
such as supermarkets and elder care, which are deemed essential during the crisis.
 Children and old aged with pre-existing medical conditions appears to be more vulnerable.
 Important Protection measures are (1) Wearing Mask (2) Washing hands (3) Staying at
home. (4) Maintaining Social Distance at public places
 All the Governments across the world have announced lockdown to protect citizens from the
pandemic.
 Isolation and lockdown lead to stoppage of economic activity and resulted
in Social, Economic, Psychological, Political and Cultural problems.
 Till date, no medication or vaccine is approved to treat the disease.
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4.  Socio - Economic effects of Covid-19 on global society:
 Economic:
 Corona virus is leading to recession in many countries due to lockdowns and closing of all commercial establishments.
 The countries viz. Canada, Malaysia, United Kingdom and Germany are already experiencing recession due to
economic stoppage.
 Economic stop is leading to loss of jobs resulting in increased unemployment.
 Demand for oil has fall down and the price has been declined by 70%.
 Covid-19 has affected all most all the sectors of the world viz. Financial Markets, Manufacturing, Arts, Entertainment,
Sports, Agricultural, Publishing, Retail, Hospitality, Retail, Tourism, Science and Technology, Banking,
Educational and Transportation etc.
 Essential commodities / services sector and Health Sectors are .continued to function during lockdowns
 Social and Psychological:
 Isolation or quarantine is leading to stress, disorder and trauma.
 Risk of infection, fear of becoming sick or losing beloved ones.
 Fear of job loss and fear of losses of commercial establishments is leading to stress and disorder.
 Women are burdened with heavy work during lockdowns due to taking care of children and old aged etc.
 Domestic violence against women has been reported in many countries.
 Educating people and combined efforts of all countries will address the issue.
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5.  How COVID-19 hit India?
 The first case of the COVID-19 pandemic in India was reported on 30 January 2020.
 As of 16 May 2020, the Ministry of Health and Family Welfare have confirmed a total of
85,760 cases, and 2,753 deaths happened in the country. Recovered cases are 30,234.
 The outbreak has been declared an epidemic in more than a dozen states and union
territories, where provisions of the Epidemic Diseases Act, 1897 have been invoked, and
educational institutions and many commercial establishments have been shut down.
 India has suspended all tourist visas, as a majority of the confirmed cases were linked to
other countries.
 India is under lockdown since 22nd March 2020 till date. However, relaxations granted in
specific regions.
 Majority of the infected cases in India are from local transmission.
 Migrant labors stranded in other states wen to home states by walking thousands of
kilometers.
 Government of India is continuously taking all necessary steps to (1) Contain spread of
COVID-19 (2) Health care of infected citizens (3) Food Security (4) Economic relief to
the citizens and MSMEs and NBFCs etc.
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6.  How is the impact of COVID-19 on economy of India?
 The economic impact of the 2019–20 coronavirus pandemic in India has been largely disruptive in
India.
 The country is under lockdown since 22nd March 2020 till date and all the business activities have been
stopped since then.
 The Indian economy was, as it is, going through a sluggish phase ever since demonetization and GST
was implemented.
 GDP forecast for 2019-20 was revised downwards to 5.4 percent from an optimistic 7% .
 Major companies in India such as Larsen & Toubro, Bharat Forge, UltraTech Cement, Grasim
Industries, Aditya Birla Group, BHEL and Tata Motors have temporarily suspended or significantly
reduced operations. Young start-ups have been impacted as funding has fallen.
 Loss of jobs lead to spike in unemployment by 20% within 3 moths time period.
 More than 45% of households across the nation have reported an income drop as compared to the
previous year.
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7.  The corona virus impact on the stock market in India was first felt at the end of February. On
28th February, the Indian share market saw a massive crash; more than Rs. 5 lakh crores in
investor’s wealth was wiped out, attributable to the Corona virus scare. The Indian indices
registered a 3.5% fall which was the second-biggest fall in the history of the Sensex.
 While the Nifty 50 has declined 27.7 per cent, the Nifty Bank index has nosedived 40.1 per cent
over the past three months.
 The stock market has historically been prone to fear psychoses, and this is one such instance.
However, there are legitimate reasons for the Indian stock market to worry and one such worry is
China’s role in the supply-demand chain in both, India and globally.
 After the COVID-19 became a global pandemic, investors are turning to gold globally considering
it the safest option to curb the economic distress. As a result gold has been witnessing a
high volatility rate. Gold is set to remain more pricey due to the continuing fears of pandemic and
rupee volatility are expected to push the yellow metal even to Rs 50,000 for 10 gram.
 Government of India & Reserve Bank of India has announced new measures along with a
package of 20 lakh crore to (1) Contain spread of COVID-19 (2) Health care of infected citizens
(3) Food Security (4) Economic relief to the citizens and MSMEs and NBFCs etc.
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8.  How is the impact of COVID-19 on Indian Banking Sector?
 The banking and financial sector is among the worst hit in the current downturn.
 The coronavirus outbreak has impacted both financial markets and consumer sentiments; and with
the ongoing liquidity concerns and lockdown situations
 Bank branches are continued to remain open amidst the COVID-19 pandemic which posed a health risk
to employees as the gathering of people allows for the spread of contagion.
 All the Banks are engaged in implementation of government schemes by transferring of DBTs to
the beneficiaries
 At the same time, record numbers of people and businesses are frantically trying to contact their Banks
with questions, concerns or to request special measures as their finances have been impacted by
the coronavirus pandemic.
 The Indian banking system is under-capitalised and continues to be saddled with
bad loans, despite some successes.
 Indian Banking sector tends to be heavily owned by foreign institutional investors (FIIs). Their massive
pull-out has led to heavy selling in these stocks.
 The slowdown already lead to job losses which may result in increased NPAs. Similarly loss of
production could lead to NPAs from Corporate and SMEs.
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9.  The financial stability report said the gross NPA of public sector banking group may rise
to 13.5 percent from 12.7 per cent and it may rise to 5.4 per cent from 3.9 per cent for
private lenders.
 Banks have already reduced the rates of FDs and increased the rate of lending to address the
economic impact of COVID-19.
 RBI has announced moratorium for a 3 months period on payment of installments of loans.
 RBI’s actions in recent days addresses most of these measures. RBI prohibited commercial
banks from issuing dividends, although it stopped short of recommending other capital
conservation measures.
 The Reserve Bank of India (RBI) has asked banks to set aside 10% of the outstanding loans
as buffers to counter future slippages from covid-19 where the three-month
moratorium was given.
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10.  What are the important steps to be taken by banks in the current scenario?
 Banks need to have a plan in place to protect employees and customers from its spread. Many
banks are already started encourage remote working of some employees.
 Banks need to focus on encouraging the customers to transact online / telephonic banking and
through other digitised products.
 Banks need to manage the direct economic impact of the coronavirus.
 Monitoring of loans to retail housing where EMIs have to be reworked,
 To keep watch on the loans having large amounts turning to NPAs and to maintain correspondence with
those corporate debtors / customers as per the guidelines of Central Bank.
 Also, the customers, who are increasingly wary of spending time in crowded public spaces, will
need to have a way to conduct banking without physical interaction. By implementing completely
digitized and remote customer transactions, banks can ensure that both every day and
exceptional processes will be carried out with limited disruption.
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