Letter to BS: Banks must redefine strategy amid Covid-19 pandemic

The recent results of almost all banks show a decline in profit, or losses. This is even before the full impact of Covid-19 is captured. Many borrowers must have been affected ad­versely by the lockdown and it is li­kely that the non-performing assets may go up if the government does not announce any special restructuring scheme. Further the banks have been affected due to the drop in their non-interest income, resulting in muted top-line growth. But the good news is that the banks are able to raise fresh capital. Un­for­tu­nately, part of the new capital will be used for cleaning the books and the banks will have to run faster to be in the earlier position.

Pressure on profits, moderate growth in business, need for higher capital and reduced credit appetite will be some of the features common to all banks in the current fiscal year. Besides, rating of some banks may also suffer. In the wake of this, there is need for an im­pro­ved supervision by Reserve Bank of India. Also, if Pa­rliament passes the revised Fi­nan­cial Sector De­ve­lop­ment and Re­gu­lation (Resolution) Bill, banks would have better solvency in absence of government support in future. There is a scope for consolidation and besides shoring up capital, banks need to redefine their strategies.

M Raghuraman  Mumbai

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