Banks

This article investigates the impact of COVID-19 on the banking sector through the trend analysis of return on assets and return on equity of the scheduled commercial banks. It covers both the pre- and post-lockdown periods. The results suggest that the governmental measures are helping ameliorate situations of bad quality loans and will improve future prospects of the banking industry.

Using the disaggregated data covering 2007–20, the study estimates the bailout barometer for state-owned banks in India. The findings show that the magnitude of the bailout barometer, in 2020, was $400 billion or around 18% of the total liabilities at the upper end of the scale. The classifications by separate categories such as size, systemic importance, and interconnectedness show that the former two categories appear to exert the most perceptible impact in terms of bailout magnitude.

Of late, banks are under pressure to improve their performance and asset quality. Diversifying income might improve their performance at a time when interest incomes are under strain. This article covers trends in diversification from 2000 to 2017 and explores the relationship between income diversification and risk-adjusted returns for banks in India. Our research supports the hypothesis that banks diversifying into non-interest income category are able to get higher risk-adjusted returns. For public sector banks, it is found that it is the dividend and treasury income that is contributing positively and significantly to risk-adjusted return.

There have been signs of stress in the balance sheets of banks in an environment of increasing uncertainties and a fragile global economy. Weakening loan recovery rates not only forces banks to face the burden of higher provisions and limits their lending capacity, it also diminishes their profitability and solvency. Examining the determinants of recovery of defaulted loans by banks in India, the need for a stronger and effective insolvency regime is felt so as to improve the debtor-creditor relationship and credit environment. The importance of the presence of collateral, the type of collateral used, and a conducive macroeconomic environment towards recovery of bad loans are highlighted. There is a need for strengthening banks' credit appraisal system. Access to alternative resources facilitates loan recovery, highlighting the need for further development of capital market as a source for adequate resources for borrowers.

“Are Trade Unions Relevant in the Indian Banking Sector?” by Bino Paul G D and Pooja Gupta Mahurkar (EPW, 16 April 2016) contains surmises and generalisations without verifiable supporting data, apart from glaring contradictions. Further, it does not address the current challenges before bank unions.