E- INTERNSHIP PROGRAMME

WEEK 1
WEEKLY REPORT ON:
IMPACT OF COVID-19 ON BANKING AND
FINANCIAL SERVICES SECTOR

SUBMITTED TO: SUBMITTED BY:

DR. KAPIL SHRIMAL ADITYA VASHISHTHA
AKSHATA REGE
ANUJ SHARMA
ARUN KUMAR PUNJABI
AVANI TOMAR
About financial institutions in India
A financial institution (FI) is a company engaged in the business of dealing
with financial and monetary transactions such as deposits, loans,
investments, and currency exchange. Financial institutions encompass a
broad range of business operations within the financial services sector
including banks, trust companies, insurance companies, brokerage firms,
and investment dealers.

Categories of financial institutions in India

• CommercialBanks:A commercial bank is a type of financial

institution that accepts deposits, offers checking account services,
makes business, personal, and mortgage loans, and offers basic
financial products like certificates of deposit (CDs) and savings
accounts to individuals and small businesses. For example:
Allahabad bank, IDFC Bank, ICICI Bank, SBI Bank etc

• InvestmentBanks:Investment banks specialize in providing services

designed to facilitate business operations, such as capital
expenditure financing and equity offerings, including initial public
offerings (IPOs). They also commonly offer brokerage services for
investors, act as market makers for trading exchanges, and manage
mergers, acquisitions, and other corporate restructurings.For
Example : J P Morgan, MorganStanley, Credit Suisse, BNP Paribas

• NBFC: NBFC (Non-Banking Financial Corporation)are financial

institution that offer various banking services but do not have a
banking license. Generally, these institutions are not allowed to take
traditional demand depositsreadily available funds, such as those in
checking or savings accounts from the public. For Example: Shri Ram
Transport Finance Company Limited, Bajaj Finance Limited, HDB
Financial Services Limited Etc.
About banking sector in India
• The Indian banking system consists of 20 public sector banks, 22
private sector banks, 44 foreign banks, 44 regional rural banks, 1,542
urban cooperative banks and 94,384 rural cooperative banks in
addition to cooperative credit institutions. As on January 31, 2020, the
total number of ATMs in India increased to 210,263 and is further
expected to increase to 407,000 by 2021.

• Asset of public sector banks stood at Rs 72.59 lakh crore (US$

1,038.76 billion) in FY19. As per Union Budget 2019-20, provision
coverage ratio of banks reached the highest in 7 years. As per
Reserve Bank of India (RBI), as of March 13, 2020, India recorded
foreign exchange reserves of approximately US$ 481.89 billion.
• During FY16-FY20, credit off-take grew at a CAGR of 13.93 per cent.
As of FY20, total credit extended surged to US$ 1,936.29 billion.

• During FY16–FY20, deposits grew at a CAGR of 6.81 per cent and

reached US$ 1.90 trillion by FY20. Credit to non-food industries
increased 3.3 per cent y-o-y, reaching Rs 89.1 billion (US$ 1.26
trillion) on February 28, 2020 and Rs 100.80 lakh crore (US$ 1.42
trillion) on March 13, 2020.

• Indian banks are increasingly focusing on adopting integrated

approach to risk management. The NPAs (Non-Performing Assets) of
commercial banks has recorded a recovery of Rs 400,000 crore (US$
57.23 billion) in FY19, which is highest in the last four years.
 IndusInd Bank
IndusInd Bank Ltd is one of the new generation private sector banks in
India. The Bank's business lines include corporate banking retail banking
treasury and foreign exchange investment banking capital markets non-
resident Indian/high-net-worth individual banking and information
technology.IndusInd Bank Ltd was incorporated in the year 1994 and was
promoted by Mr.Srichand P Hinduja a leading Non-Resident Indian
businessman and head of the Hinduja Group. The Bank started their
operations with a capital amount of Rs 1000 million among which Rs 600
million was donated by the Indian Residents and Rs.400 million was raised
by the Non-Resident Indians.

Ashok Leyland Finance Ltd a leading Non-Banking Finance company

merged with the Bank with effect from June 11 2004. On 24 July 2012
IndusInd Bank and Suzuki Motorcycle India Pvt. Ltd. (SMIPL) signed MOU
whereby IndusInd Bank will be the preferred financier to extend retail
finance to SMIPL's two wheeler customers across the country. On 16
August 2012 IndusInd Bank announced the launch of its foreign currency
pre-paid travel card - the Indus Forex card. On 13 December 2012
IndusInd Bank announced the successful implementation of financial core
banking across all its branches to facilitate the delivery of state-of-the-art
banking services. IndusInd Bank on 1 April 2013 was included in the NIFTY
50 benchmark index of the National Stock Exchange (NSE). On 29 May
2013 IndusInd Bank and American Express announced the formation of a
strategic partnership with the launch of the new IndusInd Bank Iconica
American Express credit card.
RBI (Reserve bank of India) policies during lockdown
The Reserve Bank of India (RBI) on Friday announced a slew of measures
in order to provide relief for the ongoing Coronavirus outbreak in India.
These include:

1) Repo Rate – RBI announced that it was cutting the repo rate by 75 bps,
or 0.75% to 4.4. The Repo Rate was earlier 5.15; last being cut in October
2019.

2) Reverse Repo – The regulator also announced that it would cut the
Reverse Repo rate by 90 bps, or 0.90%. On a daily average, banks had
been parking Rs 3 lakh crore with the RBI. The current reverse repo rate
was 4%.

3) Loan Moratorium – In a massive relief for the middle class, the RBI
Governor also announced that lenders could give a moratorium of 3
months on term loans, outstanding as on 1 March, 2020. This is applicable
to All Commercial Banks including Regional, Rural, Small Finance, Co-Op
Bank, All India Financial Institutions and NBFCs including Housing Finance
and Microfinance.

4) CRR – The RBI also announced that the Cash Reserve Ratio (CRR)
would be reduced by 100 bps, or 1%, to 3%. This would be applicable from
March 28, and would inject Rs. 1, 37,000 crore.

5) LTRO – The RBI will also undertake Long Term Repo Operations
(LTRO); allowing further liquidity with the banks. The banks however are
specified that this liquidity will be deployed in in commercial papers,
investment grade corporate bonds and non-convertible debentures.

6) Ease of Working Capital financing – Lenders were allowed lending to

recalculate drawing power by reducing margins and/or by reassessing the
working capital cycle for the borrowers. The RBI also specified that such a
move would not result in asset classification downgrade.

7) Working Capital Interest – A Three month interest moratorium shall

also be permitted to all lending institutions.

8) Deferment of NSFR- The Net Stable Funding Ratio (NSFR), which

reduces funding risk by requiring banks to fund their activities with
sufficiently stable sources of funding was postponed to October 1, 2020.
The NSFR was earlier supposed to be implemented by April 1, 2020.

9) MSF – Marginal Standing Facility (MSF) has also been increased to 3%

of SLR, available till June 30, 2020. “This measure should provide comfort
to the banking system by allowing it to avail an additional ` 1, 37,000 crore
of liquidity under the LAF window in times of stress at the reduced” said the
RBI.

10) Fresh Liquidity – The impact of all the announcements today shall
inject almost 3.2% of GDP, the Governor said in his brief today. The RBI
also added that since February 2020 it had injected Rs 2.8 lakh crore of
liquidity, equivalent to 1.4 percent of GDP.
About Impact of corona virus in banking sector
The coronavirus-related worries are likely to aggravate difficulties for Indian
banks, ratings agency Fitch said on Thursday, revising down the operating
environment score for the critical sector by a notch. The score has been
revised to “BB" from “BB " earlier, the agency said, pointing out that
COVID-19 outbreak ups the worries for the sector, which is already reeling
under weak business and consumer confidence.

The outlook on the score is “negative", given the uncertainty surrounding

the severity and duration of the pandemic, and the associated effects on
India's banks of restrictions on economic activity, it said.The operating
environment score was last revised down in 2019 due to the weakness in
business and consumer confidence, it said.The lockdown will impact
industrial production and domestic demand, it said, adding this will
exacerbate the economic slowdown of the past few quarters that was partly
caused by weaker credit availability from non-bank lenders from September
2018.

It however said the closed nature will help restrict the impact on economic
growth in India as compared with Asian peers. The agency said Indian
banking system is under-capitalized and continues to saddle with bad
loans, despite some successes. From a banking perspective, travel, which
forms 2.2 per cent of all loans and small business lending that accounts for
5.4 per cent will be the hardest hit, along with sectors such as auto that
depend on inputs from China.

It also warned that the retail segment, especially the unsecured ones, may
face headwinds as unemployment rises. It said Indian banks' Issuer Default
Ratings will face downward rating pressure in the near term as they are
based on support from the India sovereign and are at their Support Ratings
Floors.

But banks like Axis Bank, ICICI Bank and IndusInd Bank, whose viability
ratings are above the mid-point score for the system, are susceptible to
downward pressure on viability ratings, it said. It acknowledged that both
the private sector lenders have better income and capital buffers.
FUTURE CHALLENGES FOR BANKS AND
FINANCIAL INSTITUTION POST
COVID-19 SURVEY FORM

DEMOGRAPHIC PROFILE

1: NAME

2: GENDER

MALE FEMALE OTHERS

3: ORGANISATION NAME

4: DESIGNATION

5: JOB PROFILE
6: HOW WORRIED ARE YOU ABOUT THE IMPACT OF CORONAVIRUS
ON YOUR PERSONAL LIFE?
5 4 3 2 1
Extremely Very worried worried No worries Not at all
worried worried

7: WHAT IMPACT WILL CORONAVIRUS HAVE ON YOUR

ORGANISATION?
5 4 3 2 1
Extremely Negative No impact Positive Extremely
Negative Positive

8: WILL CORONA VIRUS LEAD TO INCREASE IN LEVEL OF

UNEMPLOYMENT?
5 4 3 2 1
Strongly Agree Agree Neither Or N/A Disagree Strongly
Disagree

9: HOW EASY OR DIFFICULT IT IS FOR YOU TO WORK EFFECTIVE

THESE DAYS?
5 4 3 2 1
Very Difficult Difficult Neither Or N/A Easy Very Easy

10: ARE YOU AFRAID TO WORK DUE TO RISK OF EXPOSURE TO

CORONA VIRUS?
5 4 3 2 1
Strongly Agree Agree Neither Or N/A Disagree Strongly
Disagree
11: DO YOU THINK YOUR ORGANISATION CAN CREATE A SAFE
WORKPLACE FOR YOU?
5 4 3 2 1
Strongly Agree Agree Neither Or N/A Disagree Strongly
Disagree

12: WILL THE CURRENT SITUATION MAKE YOUR ORGANISATION

BETTER IN LONG RUN?
5 4 3 2 1
Strongly Agree Agree Neither Or N/A Disagree Strongly
Disagree

13: WILL THE SITUATION IMPACT THE PRODUCTIVITY OF YOUR

ORGANISATION?
5 4 3 2 1
Strongly Agree Agree Neither Or N/A Disagree Strongly
Disagree

14: DO YOU THINK THE NEW ERA OF AUTOMATION WILL AFFECT

YOUR JOB AS WELL?
5 4 3 2 1
Strongly Agree Agree Neither Or N/A Disagree Strongly
Disagree

15: WILL THIS PANDEMIC AFFECT YOUR COMPANY BUSINESS?

5 4 3 2 1
Strongly Agree Agree Neither Or N/A Disagree Strongly
Disagree
16: AFTER COVID 19, WILL IT BE DIFFICULT FOR YOU TO REACH
OUT TO YOUR CUSTOMERS?
5 4 3 2 1
Strongly Agree Agree Neither Or N/A Disagree Strongly
Disagree

17: WILL IT TAKE MORE THAN A YEAR FOR YOUR ORGANISATION

TO GET BACK TO BUSINESS AS USUAL?
5 4 3 2 1
Strongly Agree Agree Neither Or N/A Disagree Strongly
Disagree

18: AFTER COVID 19, DO YOU HAVE TO RELY MORE ON DIGITAL

MARKETING FOR YOUR ORGANISATION?
5 4 3 2 1
Strongly Agree Agree Neither Or N/A Disagree Strongly
Disagree

19: WHAT DO YOU THINK WILL INCREASE POST THE PANDEMIC OF

YOUR ORGANISATION?

ASSETS LIABILITIES BOTH NONE

20: WILL NPA LEVEL INCREASES POST THE PANDEMIC?

YES NO MAYBE

21. RBI ANNOUNCED A SERIES OF MEASURES FOR FINANCIAL

SYSTEM AND FINANCIAL MARKET, HOW WILL THOSE MEASURES
IMPACT YOUR ORGANISATION?

POSITIVELY NEGATIVELY BOTH NO IMPACT

22: WHICH CATEGORY OF PRODUCTS AND SERVICES YOU WERE
ABLE TO OFFER BEFORE PANDEMIC, WHICH WILL BE DIFFICULT
FOR YOU TO OFFER AFTER PANDEMIC?

RETAIL BANKING

TRADE FINANCE

TREASURY OPERATIONS

ALL OF THE ABOVE

NONE OF THE ABOVE

23. ACOORDING TO YOU, WHICH OF THE FOLLOWING CHALLENGES

YOUR ORGANISATION WILL FACE POST COVID PERIOD? (YOU CAN
MARK MORE THAN ONE)

UNCONTROLLED NPA GROWTH AND LOW NET INTEREST MARGIN

RISE IN SERVICE CHARGES

EMI MORATORIUM

REVENUE COMPRESSION

DISENCHANTEMENT OF EMPLOYEES

ALL OF THE ABOVE

NONE OF THE ABOVE

24: WHAT CHANGE YOU WOULD LIKE TO MAKE IN THE PRODUCTS
AND SERVICES PROVIDED POST THE PANDEMIC? (YOU CAN MARK
MORE THAN ONE)

REDUCE LENDING RATES

RELAXATION OF CIBIL SCORE

INCREASE LIMITS FOR ONLINE TRANSACTIONS

DEBT RELIEF PLANS/FLEXIBLE PAYMENTS

WAIVING MINIMUM BALANCE CHARGES

REFINANCING MORTGAGE LOANS

CREDIT LIMIT REVIEW

ALL OF THE ABOVE

NONE OF THE ABOVE

25: WHAT CHANGES YOU EXPECT IN THE WORKING ENVIORNMENT

OF THE ORGANISATION AFTER THE VIRUS?