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COVID-19 and Bank Behaviour
The article analyses the impact of the pandemic on the banking sector in India. Utilising data on Indian banks, it addresses two questions: fi rst, what was the magnitude of the impact on bank lending across ownership? Second, what was the impact on their costs and returns? This article is one of the early exercises to examine the impact on banks’ balance sheets in the Indian context.
The views expressed and the approach pursued in the article are strictly personal.
The COVID-19 outbreak that began in December 2019 and rapidly spread all over the globe appears to be showing gradual signs of abating. As at mid-March 2022, coinciding with over two years into the pandemic, the virus has spread to over 200 jurisdictions and affected over 460 million people and caused over six million deaths (Our World in Data 2022). In addition to significant disruption in global economic activity, the outlook generated a major economic slowdown, affecting economic activity.
Countries responded decisively and proactively to contain the untoward effects of the sharp and sudden downturn (Cavallino and de Fiore 2020). On the one hand, governments launched massive fiscal stimulus (IMF 2020a) over and above emergency support measures by central banks (IMF 2020b). Moreover, prudential policies supported these measures in order to ensure credit growth (BIS 2020a). Also, measures were also undertaken to maintain public health and safety and expanding social safety nets to protect the poor and the vulnerable segments of the society. For the 18-month period beginning January 2020 till June 2021, the total monetary and fiscal-related spending by advanced and emerging economies aggregated $16.5 billion or about 16% of the global gross domestic product (GDP) (IMF 2021).
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