The COVID-19 pandemic has significantly impacted the financial services sector in India. Banks face increased credit risk due to debt moratoriums and potential non-performing assets. Non-banking financial corporations face similar asset challenges as banks as well as liquidity and capital issues. Insurers' balance sheets are affected with potential impacts on assets, liabilities, business continuity, and future growth. Mortality claims, loss of profit clauses, and cash flow issues also threaten insurers.

1. Impact on the financial services sector
COVID-19
By: Nikunj Pankhaniya

2. Impact on the financial services sector
COVID-19
By: Nikunj Pankhaniya

3. Impact on Bank

4.  The Reserve Bank of India has taken certain measures to
give some relief to the lending institutions in the areas of
liquidity, regulation and supervision, and financial
markets. The following are some of the business and
accounting considerations for banks:
Impact on Bank

5. Credit Risk Assessment
The RBI has given certain
waivers to the borrowers
which include moratorium to
pay principal and interest
with relaxation on their
classification as a non-
performing asset or a
restructured asset.

6. Liquidity
 Given the situation of the lock down in the country, the
defaults may have increased substantially as many
companies would have lost revenue for a long time. An
increase in defaults is likely to cause issues in liquidity
and capital adequacy.

9. NBFCs
 NBFCs would face similar challenges like banks on the
asset side. However, maintaining liquidity and capital
would be a greater challenge for them. Some of the large
NBFCs would need to create provisions as per Ind AS,
which requires provisions to be computed based on the
expected credit losses.

12. Impact on Insurance
 Insurers are getting impacted in terms of their assets and liability
reflected in the balance sheet. This, as a result, threatens their
business continuity as well as future growth.
 The pandemic is an acid test for financial institutions and more so
insurers as a stress that they have tested and scrutinized in their
financial risk analysis, operational risk analysis and business
continuity planning.

13. Mortality claims

14. Loss of Profit Clause

15. Financial and cash flow impact

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By:- Nikunj Pankhaniya