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PRIYADARSHI DASH-min PDF
PRIYADARSHI DASH-min PDF
C VID-19
T
he corona virus pandemic, COVID-19 has International Settlements (BIS) and Multilateral
unfolded a tremendous level of uncertainty Development Banks (MDBs) like New Development
in the global economy. Like any previous Bank (NDB), Asian Infrastructure Investment Bank
episode of economic slowdown, the most immediate (AIIB), etc have announced different financing
fall-out of this pandemic would be on the financial support packages to counter further deceleration
sector. This is the reason why the Reserve Bank of in global economic growth. In addition, IMF and
India (RBI) came out with a Rs 3.74 trillion of support the World Bank have announced easing the debt
that enveloped most sectors. Never before has the burden of the developing countries by delaying
RBI cut the interest rate at which it lends to banks by their payments.
75 basis points. The other key measure announced Despite the RBI package, Indian banking and
was the forbearance on payment of installments on financial sector faces tough challenges in the coming
all sorts of loans including farm loans. This will apply months. Some sectors of economy such as travel,
to all loans offered by regional rural banks, small hospitality and transportation & logistics are badly
finance banks and local area banks, co-operative hit. Credit exposure of commercial banks and non-
banks, scheduled banks, and NBFCs (including banking financial companies to those sectors may
housing finance companies and micro-finance gradually turn into bad assets in the coming days.
institutions)1. COVID-19 could further exacerbate the erosion of
The measures are meant to ease disruptions in confidence in the Indian financial system due to
fund flows to real sectors of economy, avoid working the Punjab and Maharashtra Cooperative (PMC)
capital shortage for businesses and stem panic Bank and Yes Bank crises. Before settling the blame
withdrawals by households from banks and non- over higher accumulation of non-performing assets
banking deposit-taking institutions. The confidence (NPAs) in the commercial banking sector over the
building measures have also had a positive impact on past few years, the banking regulator, the Reserve
outflows of capital by foreign institutional investors Bank of India (RBI) had to face systemic regulatory
(FIIs) as well as drying up of external commercial collapses in PMC and Yes Bank credit exposures
borrowings. The move to reset working capital loans sending worrying signals of the health and resilience
will particularly provide support to SME financing, of the banking sector. As per the Financial Stability
averting significant distortion of supply chains. Report published by RBI in December 2019,
Already anticipating the possible seizure of the “…..sources of vulnerabilities are continuously
financial sector in the world economy, the major interacting” which probably had allowed the banking
global financial institutions such as International sector to pursue accommodative monetary policy in
Monetary Fund (IMF), World Bank and Bank for the recent years. The report further underscores the
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