The central government has announced a financial assistance scheme of about Rs 20 lakh crore to offset the financial loss caused by the Corona virus outbreak. The burden of this scheme, which seeks to create a 'self-reliant India', will be borne by the banks. However, the government has in fact neglected to reassure the banks that are committed to reviving the economy. The banks, which were supposed to be the 'warriors' of Binny, have been given only a burden. As a result, analysts are unanimous that the post-Corona economy will be uncertain, but the burden on banks will increase.
The RBI cut the repo rate twice to keep the economy afloat during the blockade. On March 27, it was 0.75 per cent, while on May 22 it was 0.40 per cent, down 1.15 per cent. In addition, banks have been asked to keep open the door for free lending to microfinance institutions, non-bank as well as home finance companies and mutual funds as per the central government and central bank directives. In addition, Finance Minister Nirmala Sitharaman announced an unsecured loan of Rs 3 lakh crore for micro and small and medium enterprises (SMEs) as part of the 'Self-Reliant India' campaign, with increased funding for agriculture and allied sectors, various businesses and industries. The Reserve Bank of India (RBI) has decided to postpone the recovery of loan installments for six months till August. The NPA limit was also increased to 180 days instead of 90 days, while businesses that failed to repay the loan were given protection for a year under the Bankruptcy and Insolvency Code. It has been criticized that the aspect of empowerment of banks has been neglected in this plan which has come forward with banks at the center.
The overall effect of forcing financing on banks, slackening the maximum lending to a particular company and industry, and not allowing banks to use bankruptcy proceedings will further aggravate the creditworthiness of already depleted banks, Fitch Ratings reports. Banks' non-performing assets (NPAs) are expected to grow by about six per cent, the report said. Satish Marathe, a member of the central board of directors of the Reserve Bank, has also criticized the banking sector. At present, banks need help from the government in classifying bad loans and the provisions to be made in this regard, said Marathe. Fitch Ratings has identified the need for generous capital assistance from the government to all banks in the near future.
With banks playing a pivotal role in getting the economy back on track, CKP Co-operative bank of Maharashtra has had its license revoked, while three co-operative banks (Saraswat Bank - Rs 30 lakh, TJSB Bank - Rs 45 lakh and Bharat Sahakari Bank have been fined Rs 60 lakh) were fined by RBI. Apart from this, large fines were levied on private and public sector banks. In the face of such a daunting challenge, the decision to take immediate action would have been more rational.
Seven Bank employees Died
During the lockout period, the bank employees worked hard to ensure that the banking services were available to the public uninterruptedly. Employees had to work in such a way that they were deprived of adequate means of travel and safety by exercising whatever means of transportation were available. While the branches were operating with minimal manpower, the government introduced a scheme of direct financial assistance from the Jan-Dhan account under the Garib Kalyan Yojana, which saw a relatively large influx of people in many branches outside the cities (especially during the month). Devidas Tuljapurkar, General Secretary, Maharashtra State Bank Employees Federation, lamented that the Prime Minister and the Chief Minister did not even mention the contribution of the bank employees during the challenging period. According to a press release issued by him, Seven bank employees (Two Bank of India, Two State Bank, One IDBI, One Punjab National Bank and One Federal Bank) were died in the pandemic. Still Government has not considered them as a Corona Warrior.
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