Mangaluru, September 6, 2020: Coronavirus pandemic has posed the biggest challenge in history to the survival of economy and business globally. Mangalore Today spoke to leading lights of business and industry to analyse the situation and gain their unique perspectives on the way back to recovery and growth.
What is your opinion about the financial crisis due to COVID-19 on the economy?
Covid-19 is a black swan event of the century. Sudden outbreak of never seen before pandemic Covid-19 has brought the world to almost a grinding halt. It has brought with it far reaching consequences beyond imagination. The sectors like tourism, hospitality, sports, aviation, automobile, real estate, education, infrastructure, etc. are hit the most. These sectors may take longer than expected time for revival post COVID-19. Some special packages by the respective governments may be needed for them to survive. The financial instability is visible in many parts of the world. Cash flows of all sectors are dwindling. There is a wide mismatch. To stimulate the economy, governments in most of the countries came out with various stimulus packages so also the Central Banks. This mainly aims in ensuring the liquidity in the financial sectors and maintain the economic stability. Indian GDP is facing negative growth which had never happened in the past crisis. Banking sector had also seen severe market cap erosion till May2020, with visible recovery in the recent past.
How do you assess the COVID-19 pandemic impact on business, especially MSMEs?
MSMEs are one of the important sectors and backbone of Indian economy as they are the biggest employment generators providing millions of jobs and creators of wealth for the nation. MSMEs are the growth engine of Indian economy. This pandemic’s sudden impact is on MSMEs as these sectors are very much prone to the shocks and volatility in the economy besides operating on thin margins. The sudden and substantial impact of the Covid-19 across the globe pushed them to a deep shock which this sector is not capable of withstanding. During the lockdown, many MSMEs had to close down their operations due to various restrictions. The manpower shortage also grappled these sectors as they are labour intensive.
However, the timely regulatory and government of India’s stimulus packages provided much required handholding. The banks in India are also effectively involved in ensuring the required credit flow to these sectors. The satisfactory note is that these MSMEs are slowly coming on the track post Covid-19 lockdown. But there is still a long way to go for full-fledged recovery. Karnataka Bank also has good number of MSME borrowers. In line with the guidelines of RBI and Govt. of India, Karnataka Bank has flung into action and helped all the needy and eligible MSMEs by way of timely credit assistance to them. We are extending the required credit facilities under GECL (Guaranteed Emergency Credit Line) Scheme. I am happy to inform that recently we have launched a credit scheme exclusively to help micro sectors called ‘KBL-Micro Mitra’, wherein the Bank is extending credit facilities to eligible micro industries. Further, we are also in the process of extending the benefits of OTR (One Time Restructuring) to the eligible borrowers.
As a banker, what are your suggestions to survive the crisis financially? Can you elaborate on the banking support? What is your advice to people in general, to survive economic crisis?
It is said that survival is the priority during extreme crisis situation. Covid-19 pandemic has thrown such a situation requiring utmost prudence to maintain the economy as well as health of citizens on the track. Banks and other financial institutions have a great role to play as far as the economy is concerned. For a developing country like India, MSMEs, agriculture and allied activities, infrastructure development etc., contribute significantly in terms of generation of income, employment and wealth creation. It is under these pressing circumstances, RBI has permitted the banks to extend moratorium on payment of installments as well as interest to all the loan accounts which are standard as on 29.02.2020. The moratorium which was applicable up to 31.05.2020 has been further extended by another three months up to 31.08.2020. RBI has also come up with various stimulus packages to support MSME, farmers, street vendors, etc., by means of OTR (One Time Restructuring). Bankers have already taken necessary steps to implement these packages to overcome the adverse effects of Covid-19 pandemic on the economy.
Further, the pandemic has made the ‘Make-in-India’ initiative to be more relevant. With our Prime Minister vouching for ‘Local, Vocal & Global’ concept and offering the necessary support from the Central Government, post Covid-19, I am sure, India will witness tremendous growth in start-ups and MSMEs sectors pursuing the ‘Atmanirbhar Bharath’ concept. This naturally opens up abundant business opportunities for banking sector. It is believed that the economy will rebound soon post Covid-19 and India will become the reckoning force in the world. The concept called ‘contactless banking’ will also become reality duly powered by digital push.
RBI also moved swiftly to revive economy and to preserve stability in financial sector. The recent move by RBI is to allow banks a onetime loan restructuring of stressed accounts both in retail and corporate. This window will enable the banks to maintain the status of the accounts as standard even after restructuring subject to an accelerated provisioning of 10% on those loans. The stressed sector deserves this special support to revive the economy.
Karnataka Bank has also implemented various loan schemes in line with the government as well as RBI guidelines. The main aim of all the initiatives is to extend need based credit support to all the eligible units including MSMEs to tide over the current situation. I am happy that majority of the eligible borrowers availed the credit facilities and we are also working on extended hours to ensure that all the eligible borrowers are financed in time. We are in constant touch with all our borrowers to give necessary handholding support during this crisis. Bank has played a crucial role in spite of various challenges to ensure that financial sectors are kept open to the public even during the lockdowns and ensured that we remained steady and resilient.
It is also a fact that near universal lockdown and weak consumer sentiment have caused demand destruction in the real economy. A significant downfall is observed in discretionary spends such as travel, luxury shopping etc. It is under this context, the concept of ‘conserve and consolidate to emerge stronger’ plays an important role. Therefore, it is imperative for every citizen to be cautious in spending and it is the need of the hour to conserve the resources by all, as the total impact of this pandemic is yet to be assessed and the situation still largely remain uncontrolled as of now. Everyone needs to join hands with the Authorities in containing the spread of this pandemic by strictly adhering to the government guidelines so that we can all sail through this turbulent situation together smoothly and bounce back stronger as quickly as possible. Though RBI in its monetary policy did not give any specific forecast of GDP contraction due to uncertainty of Covid-19, but considering the strong fundamentals of micro economy of the country, I am hopeful of a good recovery in the financial stability and growth post Covid-19 pandemic, though downside risks would continue to prevail.
What role has online banking played during these difficult times?
Globally the digital banking has been gaining the traction over the last decade, more intensively since last six years. In India also, the present dispensation at the Centre is attaching great importance on digital drive to increase the efficiency and excellence in administration and implementation of various initiatives. The banks in India are also giving lots of thrust on digitization of banking transactions and product deliveries to enhance the customer experience. The banks are focusing more attention on digital journey in all spheres of banking. This digital or online banking helps the banks to ensure the compliance with zero errors and at the same time to extend quick and secured services to its customers. India’s ability to march steadily with its digital journey on all major areas came in handy to face the challenges during the current crisis. Even during the prolonged lockdown period, the banks were able to ensure seamless banking services thanks to their online banking capabilities. Had the banks been not on their digital journey all these years, the public would have faced great hardships. With the help of online banking, the government is also able to quickly disburse various subsidies through DBT mechanism. There has been remarkable increase in the on-line transactions during the past four months thanks to the advent of technology.