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Financial Impacts of COVID-19: A Special Emphasis on the Sustainability of Indian Banking Sectors and Stock Markets

Pradeep Reddy K.1, Venkateswarlu Chandu2, Ch. Sahyaja3, Shifaly4, Elia Thagaram5, Amala Gangula6 and Debesh Mishra7*

1School of Management, Sanjeev Agrawal Global Educational University, Bhopal, India

2K. L. Business School, KLE Foundation, Vaddeswaram, AP, India

3GITAM School of Business, GITAM University, Hyderabad, India

4The Hindu College MBA, Machilipatnam, AP, India

5PACE Institute of Technology and Sciences, Ongole, AP, India

6Institute of Banking Personnel Selection, Mumbai, India

7Mechanical Engineering, IES University, Bhopal, India

Abstract

Pandemic COVID-19 depresses the entire global economic situation. Perhaps the most horrendous period of history that has ever been faced by humanity. No country, whether underdeveloped or developing, was spared its wrath. The COVID-19 pandemic had a particularly negative impact on the sustainability of the Indian economy. The Indian banking system encountered and is still facing several issues. With the support of reforms, the government and the Reserve Bank of India (RBI) implemented the required policy modifications to combat the COVID-19 epidemic. The goal of this research is to investigate the state of the Indian banking industry during COVID-19, the changes implemented by RBI as a result of COVID-19, and its effects on the sustainability of Indian banking sectors in addition to the stock markets in general. The banks in India were founded primarily with the intention of making money by providing clients with the services they anticipated. However, the COVID-19 pandemic distorted the Indian clients’ situation. People’s sources of income were threatened by the lockdowns and closures of enterprises. In the present pandemic condition, Indian banks face these issues with a deprived stock market as well.

Keywords: COVID-19, banking sectors, stock markets, pandemic, economic, India, sustainability, businesses

Abbreviations

1.1 Introduction

With thousands of deaths worldwide, the corona virus outbreak has affected millions of people. The threat of corona virus is growing as new cases emerge on a daily basis. The Corona viral sickness was found in Wuhan, China in December 2019, and it has since become widespread [1–3]. Following the observation of its infection and amplified death rate, the World Health Organization (WHO), on March 11, 2020, declared it as a pandemic. In the current circumstances, India is severely hit by the Corona virus. COVID-19 causes the global economy to contract, affecting its sustainability. COVID-19 has a broad influence on India. According to a study released by the Reserve Bank of India (RBI), the corona virus damaged enterprises, organizations, and corporations that operated well before the epidemic. The three sectors that make up the bulk of the Indian economy are the primary, secondary, and tertiary sectors, all of which are heavily reliant on the banking industry [4, 5]. As part of its conventional activity, all of these sectors receive financial assistance from the banking sector, which disburses advances, loans, short-term credits, letters of credit, debt securities, and the like. The next era of Indian banking involves tasks such as foreign-exchange support, digital banking, e-commerce, and tele-banking [6].

The uncertainty regarding the scope and length of the epidemic, as well as the consequences for Indian banks of any accompanying limitations on economic activity, has made the overall operating climate unfavorable. The Indian financial sector, which includes banking, non-banking investment firms, and insurance companies, has a significant impact on the real economy because it creates credit and mobilizes available funds. As is well known in the modern period, the Indian government declared a total lockout of the nation beginning on March 24, 2020, which was later prolonged through May 3, 2020. In order to preserve the lives of the citizens of India, the government must go on lockdown. Due to this, all businesses, educational institutions, and offices in the public and private sectors have been shutdown. This will have a significant impact on many areas of our country. The Indian economy is built on sustainability of banking sectors. The purpose of this research was to examine the causative impact of pandemic COVID-19 on the sustainability of banks as a result of the lockdown.

1.1.1 Objectives of the Study

1. To investigate the COVID-19 afflicted area.
2. To investigate the impact of COVID-19 on the sustainability of Indian banking sectors as well as on the stock markets.
3. To investigate government and Reserve Bank of India (RBI) initiatives in response to COVID-19.

1.2 Research Methodology

The impact of COVID-19 on the Indian banking sector is the basis for the research. The study relied on secondary data. For this research, the RBI’s websites, manual, recommendations included in the RBI’s manuscripts, books, websites, periodicals, and newspapers were used to acquire information.

1.3 Literature

1.3.1 Impact Areas of COVID-19

Standard teller tasks including cash transactions, disbursements, check clearing, and other banking processes all required maintaining a safe distance of at least one meter. Customers’ and workers’ operational and technical difficulties revealed a weakness and a general lack of adaptability in our banking systems when confronted with an emergency crisis. The bank should refocus its focus toward digitizing and streamlining its backend processes as a result of the present COVID-19 issue. As a result, banks ’would not have to rely on staff interaction, paper-based reviews led by individuals, or manual data entry. In addition to accelerating technology adoption, the COVID-19 crisis will refocus attention on important financial issues, such as:

• Adoption of emerging technologies - as a result of the virus and economic instability, emerging technologies will play a critical role in speeding up transactions and lowering bank expenses. The Indian banking sector has recognized the importance of technologies in attaining success. By removing vertically integrated burdens, it forecasts increased use of microservice building. In the process of digitally transforming banks and other financial institutions, these new technologies will be crucial [7].
• Mechanism of digital revolution - according to the World Bank’s 2017 global index report, India have the world’s second biggest unbanked population, with 190 million people lacking an account with a bank. The major goal of enhanced internet and mobile connectivity would be to advance technology-enabled digital banking access. Additionally, the business would aim to gradually change customers’ preferences away from going to bank locations and toward using digital means. To provide the best channel mix, banks will allow their clients to communicate via several automated and digital channels. To facilitate effective adoption by Indian banking users, banks would evaluate critical criteria such as demography, availability to the internet, last mile connection, customers’ banking behavioral patterns, and so on [8].
• Privacy, security, and customers’ satisfaction - as reported by the RBI, cyber thefts increased in India’s banking industry during the fiscal year 2017, 18, resulting in losses of $13.7 million. With the rising usage of cashless and digital economies, banks will need to create safe frameworks. Financial frauds, money laundering, data loss, identity theft, and privacy breaches are all clear cyber dangers. Banks must take stringent measures to determine external and internal system vulnerability. For safe and smooth transactions, they should be technically fortified with stringent Know Your Customer (KYC), good client identity verification, financial-grade APIs, gateways, smart networks, and so on [9].
• Policies and compliance requirements - in order to build a financial ecosystem for our nation’s underbanked and unbanked people, the emphasis should be on improving electronic payments facilities, particularly in rural India [10, 11].

1.3.2 Reforms by the Government of India and RBI

India’s top government agency is RBI. which prepares monetary policy-providing directions to all banking institutions. The RBI promotes economic stability while maintaining the country’s growth. It announced the “COVID-19 Regulatory-Package” for banks and financial institutions as well as all urban (core) credit unions, provincial financial institutions, and region headquarters’ financial institutions including all non-banking financial companies and all institutions of finance across the country (including housing finance companies). For the needy requiring financial assistance for their means of subsistence and food security, the government decided on 1.7 trillion packages....