REPORT ON TREND AND PROGRESS OF BANKING IN INDIA 2020-21

 With the emergence from the shadow of Covid-19 and its ramification on the banking
institution, a report by the RBI on the progress of banking in India from the year 2020-21
was published wherein it noted that during 2020-21, the banking sector navigated the
disruptions caused by the pandemic and the economic downturn with resilience,
cushioned by various policy measures undertaken by the Reserve Bank and the
Government for the credit cycle to gain traction and support the ensuing economic
recovery.

 However, the report also cautioned by noting, inter alia, that most pandemic measures
had a well-specified sunset clause, and some have run their course during the year.
However, the impact of these transient measures on banks’ financial health is not
immediately clear and can be fully fathomed only after the passage of time.

 Some of the support measures highlighted in the report were the expiry of the suspension
on fresh proceedings under the Insolvency and Bankruptcy Code (IBC), the establishment
of National Asset Reconstruction Company Limited (NARCL), high capital cushion for
banks, substantial change in the ownership pattern in Commercial Banks, a moratorium
on loans, asset quality standstill, restrictions on dividend pay-outs, zero risk weight on
credit facilities covered by credit guarantee schemes backed by Government, etc, most of
which ran their course in 2020-21 itself. It also included the 2020 Amendment to Banking
Regulation Act, 1949 to regulate and supervise co-operative banks as well as to regulate
mergers and amalgamations between UCBs.

 The report also touched upon the issue of the changing nature of banking— especially the
increasing use of technology— presents challenges as well as opportunities for an
inclusive and sound banking sector and also the assessment of the systemic impact of
climate change on the economy and financial stability. In a nutshell, it substantiated that
the Indian financial sector is standing at crossroads: while the immediate impact of the
fallout of COVID-19 will dominate the short-term, larger challenges relating to climate
change and technological innovations will need a carefully crafted strategy.