New-age tech, key to sustaining post-pandemic BFSI sector: Robin Bhowmik, Manipal Global Academy of BFSI

Robin Bhowmik

The Novel Coronavirus disease (COVID-19) is now spreading across the globe resulting in a total lockdown in many countries. India declared a 21 days complete lockdown, barring some essential services. This pandemic has affected services like education, food & beverages, travel & transportation, tourism, airline, and others.

Robin Bhowmik

Moody’s Investors Service on Friday cut India’s GDP growth this calendar year to 2.2% from 5.3% estimate. Rating agency CRISIL has also lowered India’s economic growth estimate to 3.5 per cent from their earlier estimate of 5.2 per cent for the year 2020-21.

Banking as a major service sector is also witnessing the impact of coronavirus. The general economic slowdown due to the COVID-19 has hit the banking business as well. As the businesses shut down and industrial productions go slow, the banks face a shortfall in current account transactions and credit repayments. The slowdown in imports and exports is leading to a decline in foreign exchange earnings. This will also cause for cumulation of non-performing assets (NPA).

Other business opportunities banks involved are also dwindling because of Coronavirus. For instance, HDFC is one of the largest banks, which sells travel cards. Since the virus outbreak halted the travel and tourism industry, the entire business from travel cards has come down.

Rescue plans

In the emergency meeting of the monetary review committee, the Reserve Bank of India (RBI) on March 27 decided to cut the cash reserve ratio by 100 basis point to 3% for a year as a contingency measure during the COVID-19 crisis. RBI Governor Shaktikanta Das described this as a step to ensure sufficient liquidity in the system. The central bank has also lowered the repo rate by 75 bps to 4.4% and reverse repo rate by 90 bps to 4%.

The crucial demand from lenders has been fulfilled by RBI’s deferment of all term loan instalments (EMI) for three months till June 30 without declaring those individuals as defaulters. It is a confidence-boosting step from the side of RBI. These are appreciable steps to save the banking as well as the economy from the upcoming post-pandemic recession.

As part of measures to ease the economic impact of the lockdown, the Indian government has declared ₹1.7 trillion economic stimulus package including direct payment of money to the beneficiaries’ accounts.

Digital-first approach

Reports say that RBI along with other lenders plans to reduce branches opening in this lockdown days, aiming to prevent employees from becoming infected with the coronavirus. RBI has already issued advisories to customers to avoid depending on banks and ATMs as a precaution to stop the spread of the virus. Instead, the customers were instructed to use digital options. Based on the orders of the banks, banks have stopped non-essential services. All banks are promoting their digital banking facilities.

The digital transformation has already decreased the footfalls to the bank branches.

The customers can now do almost all the transactions through digital banking that includes net banking, mobile banking, SMS banking etc. Third-party digital payment applications are also seeing a surge in their usage. The biggest achievement the banks expect from the lockdown is the wide popularity for their digital banking products.

Precautions to be taken by banks

The RBI on 16th March issued a circular to banks listing the operational and business continuity measures. The circular has mandated the banks to assess the COVID-19 impact on their balance sheet, asset quality and liquidity etc., in case of further spread of the virus in India and economic consequences. The banks are asked to “take immediate contingency measures to manage the risks under intimation to us.”

However, RBI has emphasized to devise strategies to prevent the spread of the virus within the organization. The circular has also directed to “making timely interventions for preventing further spread in case of detection of infected employees including travel plans and quarantine requirements as well as avoiding the spread of panic among staff and members of the public.”

Banks are asked to take necessary precautions by revisiting Business Continuity Plan to avoid service disruptions in case of employee absenteeism due to infection or quarantine measures. The banking regulator has also advised sharing information among staff about the disease and the organization’s strategy time-to-time. Forming a Quick Response Team to monitoring and reporting the situation to management and regulator is another instruction from RBI.

At the branch level, all banks have stressed on frequent cleaning of premises including the usual convenience areas such as door handles, chairs, tables etc. Branches are keeping hand sanitizers for both customers and employees. Sanitizing the ATMs is a crucial task as many people use the machine and all the activities have to be done by touching either screen or keypad.

Though some countries are trying to sterilize the cash, RBI has not taken such measure so far. Instead, the RBI advises people to sanitize hands before and after handling currency notes and coins. Whether currency notes carry the virus is yet to be proven.

Post-corona banking

As experts predict, this pandemic will be a crossroad in world history as this has already affected more countries than two world wars. The entire world economy is going to face the recession worse than the 2008 financial crisis and every country has taken contingency measures to lower the impact.

Banking is also facing the brunt of this lockdown. The possible unemployment may lead to accumulation of NPAs in the bank. Furthermore, as mentioned above, all banks are now promoting their digital services. Many banking professionals may lose their job when banks digitise the majority of their services. The only solution is to update their skill in new-age technologies to stay relevant in the post-pandemic banking sector.

Views expressed in this article are the personal opinion of Robin Bhowmik, Chief Business Officer, Manipal Global Academy of BFSI.

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