Impact of Lockdown on Banks

As we all know that, the entire system of banks is in trouble because of the lockdown applied by the government due to rapidly increasing case of Corona Virus (COVID -19) for 21 Days.

This will lead to building up of Non-performing Assets (NPAs). NPA is a loan for which either the interest or principal amount is overdue for more than 90 Days. Also the various Business operations & supply chains got affected due to this Lockdown and obviously it will take longer time to repair it.

Reserve Bank of India (RBI) has taken many measures to cope-up with the loss which the banks has to face due to the lockdown, like - the Repo. rate were reduced and also the Counter Cyclicle Buffer (CCB) were reduced, and the banks are given additional time to deal with the loss occured during the lockdown period. But this will not be enough to get the loss back & to cope-up with the situation. For a bank, the asset is the loan or advances which are given by the bank.

Concern of Bankers

Loan provided by bigger Moneylenders got a darkest shock, as they are not able to get back their during this Lockdown period.
The lockdown effected all the airlines, real estate, Auto dealers, Jewellery, etc.
Banks are concerned about the loans which they have to manage this loss.
According to RBI's financial stability report, the share of large borrowers in scheduled commercial banks total loan portfolios and their share in GNPAs (Gross NPA) was at 51.8% and 79.3% respectively, in September 2019.

Problem with Different Sectors

As we all know that the Lockdown is increaded till 3rd May, 2020. But it directly affects the GDP of all the countries.
Most of the companies are not able to look after their business because their is no any labour to work for the company & it will directly affect on the work & production of the company. As it gets very difficult to restart everything.
All the major sectors whether it is travelling, shopping, jewellery, banks or business will take a long time to restart, because also there is a fear & risk in the people's mind of having COVID 19 around.

Fear of Extending Lockdown

Measures taken by the RBI to protect the banks for next 3 months, but it will not provide complete relief to the bank. It is upto some extent.
As most the business come up to a hold, so RBI has already announced to get relief from loans for 3 months. But it is not the permanent solution. So, RBI is looking after all the measures so that the situation can be handled.
Most of the people have a fear of extending the Lockdown, as it is already extending from 14 April, 2020 to 3rd May, 2020. So it will adversely affect the economy & GDP.
Due to the lockdown, the economic recovery will take a time to set up.

Divided in 3 Sectors

1) Least Affected Category

Includes sectors - Pharmaceuticals, Telecom, Fast Moving Consumer Goods (FMCG), Fertiliser Oil, Refineries, Power & gas distribution and transmission. These sectors are least affected & they get back with goods easily among other categories at faster time.

2) Moderate Affected Category

Includes sectors - automobile manufacturers, power generators, roads and construction. These sectors are moderately affected & cope-up in moderate time.

3) Worst Affected Category

Includes sectors - airlines, gems, jewellery, auto dealers and real estate. These sector will require more than normal time to bounce back as they are worsely affted due to lockdown.

Impact of Lockdown on Banks - COVID 19