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Banking Sector Resilient in the Face of Pandemic
Contrary to several gloomy forecasts, the Indian banking sector has been surprisingly resilient in the face of the pandemic. This is because corporates, which account more than half the loans, are in better shape and banks are well-capitalised. This bodes well for loan growth and bank performance post the pandemic.
Two waves of the COVID-19 pandemic have rocked the Indian economy. The economy shrank by 7.3% in terms of the gross domestic product (GDP) in 2020–21. In 2021–22, growth is expected to be 9%–10% instead of the 12% plus that was widely projected before the second wave struck.
Yet, as the Reserve Bank of India’s (RBI) Financial Stability Report (FSR) of July 2021 makes clear, the impact on the banking system of the two waves has been less than what most people might have feared. This is a remarkable outcome considering that the banking system had entered the pandemic in a state of stress.
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