LONG TERM RESEARCH PROJECT REPORT ON

“A STUDY ON AFFECT OF FINANCIAL SCAMS ON EQUITY

MARKETS”

Long Term Research Project Report submitted in partial fulfilment

requirements for the award of the degree of Post Graduate Diploma in
Management

Submitted by
Mrunalini Vanka
Roll. No. 2201220

Under the Guidance of

Dr. Naresh Bora
IPE, Hyderabad

Institute of Public
Enterprise
Batch: 2022-2024

1
 Institute of Public
Enterprise
Hyderabad, Telangana State, India-
500101

Declaration
I hereby declare that the work presented in the project entitled “A STUDY ON AFFECT OF
FINANCIAL SCAMS ON EQUITY MARKETS”, is Long Term Project Report submitted in
fulfillment of the requirements for the award of the degree of Post Graduate Diploma in
Management under the super - vision of Dr. Naresh Bora mentor and faculty of Institute of
Public Enterprise, Hyderabad. The matter presented in this project work has not been submitted
by any one or by me for the award of any other degree of this or any other Institute/University

Mrunalini Vanka
2201220

2
 Mentor Certificate

This is to certify that the above statement made by the candidate is true to the best of my
knowledge.

Place: Hyderabad Dr. Naresh Bora

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 ACKNOWLEDGEMENT

With immense pleasure, I wish to express my respect and deep sense of gratitude to my
mentor and guide Dr. Naresh Bora, Institute of Public Enterprise, for his wisdom, vision,
expertise, guidance, enthusiastic involvement, and persistent encouragement during the
planning and development of this research work. I also gratefully acknowledge his
painstaking efforts in thoroughly going through and improving the manuscripts without
which this work could not have been completed.
I am highly obliged to Prof. S. Sreenivasa Murthy, Director, IPE, and Dean of Academic
and Chairman Placements, and Prof. Y Ramakrishna, Coordinator of PGDM, IPE for

providing all the facilities, help and encouragement for carrying out the project work.

Mrunalini Vanka
2201220

Table of contents:
4
CHAPTER NO DESCRIPTION PG NO

CHAPTER - 1 INTRODUCTION 6

CHAPTER - 2 RESEARCH METHODOLOGY 14

CHAPTER - 3 COMPANY PROFILE 22

CHAPTER -4 28
DATA ANALYSIS

CHAPTER – 5 FINDINGS AND CONCLUSIONS 45

CHAPTER – 6 BIBLIOGRAPHY
49

5
 CHAPTER I

Introduction
Executive Summary:

6
The COVID-19 pandemic poses significant challenges to the financial services sector,
potentially making it one of the most severe crises in a century. The banking industry is
particularly impacted by decreased demand, reduced incomes, and production shutdowns, all
negatively affecting their business. In addition, staff shortages, limited digital capabilities,
and strain on existing infrastructure further compound the difficulties faced by financial
institutions in adapting to the impact of COVID-19. As the virus spreads globally, borrowers
and businesses are grappling with job losses, declining sales, and decreased profitability,
leading banking customers to seek financial assistance.

Pandemics have far-reaching effects on financial systems due to their profound economic
consequences. To mitigate the direct economic impact of the coronavirus, banks must have
robust plans in place to safeguard the well-being of their personnel and customers. Many
institutions have already implemented remote work arrangements for certain employees. The
coronavirus outbreak in India has raised concerns about the potential disruption to the
country's financial system, jeopardizing the progress made in its long-term financial recovery.
Given that banks play a central role in the economy by providing financial support to both
businesses and individuals, their reliability is crucial for maintaining the overall functioning
of the system.

The global COVID-19 pandemic has resulted in a significant loss of lives and poses an
ongoing threat as new cases continue to emerge daily. Countries affected by the coronavirus
are taking significant measures to combat its spread by leveraging AI and Big Data
technology, as recognized by the World Health Organization (WHO). The continued
proliferation of COVID-19 presents one of the most serious risks to the world economy and
financial systems.

Moody's downgraded India's banking sector outlook from stable to negative, citing
disruptions in economic activity caused by the COVID-19 pandemic and a subsequent
deterioration in asset quality. Moody's predicts a decline in asset quality across various
sectors, including corporates, small and medium-sized enterprises (SMEs), and retail
divisions, placing pressure on lenders' profitability and capital. The stress faced by non-bank
financial institutions may limit their lending capacity, further impeding India's economic
development, which was already slowing prior to the outbreak. The significant decrease in
economic activity and rising unemployment are expected to negatively impact personal and
business finances, leading to an increase in delinquencies. To address the challenges posed by
COVID-19, the Government of India and the Reserve Bank of India have implemented a
range of economic and fiscal stimulus measures. In these extraordinary circumstances, the
banking, financial services, and insurance (BFSI) sector must prioritize liquidity, credit risk
management, employee well-being, and the integrity of financial reporting and disclosures.

The COVID-19 would have an influence on the financial statements of financial services
organisations in the areas of business model evaluation, post-balance-sheet events, and some

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other crucial areas.In the areas of liquidity, regulation and supervision, and financial markets,
the Reserve Bank of India has taken several actions to provide some assistance to lending
institutions. In light of these requirements, banks must examine financial and reporting issues
such as going concern, liquidity, and credit risk assessment, among others. Large-scale
business interruptions may occur, potentially causing financial concerns for specific
organisations. This might have an influence on credit quality across the supply chain.

Introduction of the Indian Banking Sector

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A bank is an institution that fulfills the main purpose of receiving deposits and lending
money to individuals, businesses, and governments in need. They are generally considered
trustworthy in most parts of the world. When someone deposits money in a bank, regardless
of the amount, they have confidence that their funds will be safeguarded more effectively
compared to other places. Moreover, banks offer a wide range of services such as credit and
debit card facilities, loan options, and fixed deposit plans. In India, there are presently a total
of 33 banks, comprising 12 public sector banks and 21 private sector banks. These banks hold
a significant position in India's economy and contribute substantially to employment in the
country. The Indian banking sector is a crucial component of the nation's financial system,
acting as the key intermediary between savers and borrowers. It encompasses public sector
banks, private sector banks, foreign banks, cooperative banks, and regional rural banks..

An overview of the Indian banking sector:

1. Public sector banks: The majority of the Indian banking sector is comprised of public
sector banks, which are owned and operated by the government. These banks account for
around 70% of the total banking industry assets.

2. Private sector banks: Private sector banks are owned and operated by private individuals or
companies. They have grown rapidly in recent years and now account for around 20% of the
total banking industry assets.

3. Foreign banks: Foreign banks are banks that are headquartered outside of India but have
branches or subsidiaries operating in the country. They account for around 5% of the total
banking industry assets.

4. Cooperative banks: Cooperative banks are owned and operated by their members, who are
typically members of a specific community or profession. They account for around 3% of the
total banking industry assets.

5. Regional rural banks: Regional rural banks (RRBs) were established to provide banking
services to rural areas. They are jointly owned by the government, the sponsor bank, and the
local rural community. They account for around 2% of the total banking industry assets.

The Indian banking sector has undergone significant reforms in recent years, including the
introduction of new technology and digital banking initiatives. The sector has also been
affected by non-performing assets (NPAs) and the ongoing challenge of loan recovery.
However, the Indian banking sector has shown resilience and has continued to play a critical
role in supporting the country's economic growth.

9
Covid 19 and Bank Behavior
The COVID-19 pandemic, which emerged in December 2019 and rapidly spread globally, is
showing signs of receding. By mid-March 2022, the virus had reached over 200 countries,
impacting more than 460 million people and causing the death of over six million individuals
in the span of over two years. Alongside the severe disruption to global economic activity,
the pandemic led to a significant recession that had far-reaching effects.

Countries responded swiftly and proactively to mitigate the adverse consequences of the
rapid and unforeseen downturn. Governments implemented substantial fiscal stimulus
measures, complemented by emergency assistance from central banks. Prudential regulations
were also in place to support credit growth. Efforts were made to protect public health and
safety, as well as to expand social safety nets to safeguard vulnerable and impoverished
segments of society. From January 2020 to June 2021, advanced and developing economies
collectively spent approximately $16.5 billion, equivalent to around 16% of the world's GDP,
on monetary and fiscal-related initiatives.

The Indian banking system experienced significant damage due to the COVID-19 outbreak.
The global pandemic affected various aspects of the banking industry, including business
continuity, operational challenges, and overall financial performance. Indian banks witnessed
a rise in non-performing assets (NPAs), credit demand, and profitability issues. With the
shutdown resulting in a lack of revenue and increasing expenses, many borrowers faced
difficulties in repaying their loans, leading to a liquidity crisis. The Reserve Bank of India
and the national government implemented several initiatives to address these challenges and
provide support to the banking sector.

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Indian Banking Sector during pandemic
As of August 31, 2020, approximately 40% of outstanding bank loans were granted a
moratorium by the Reserve Bank of India (RBI) to assist borrowers affected by COVID-19.
Most sectors witnessed a decrease in outstanding loans under the moratorium in August 2020
compared to April 2020. However, micro, small, and medium enterprises (MSMEs)
experienced a slight increase, with 78% of MSME customers opting for the moratorium in
August 2020, indicating the stress faced by this sector. The distribution of moratorium
requests in MSME loans revealed that urban cooperative banks (UCBs) faced the highest
level of early stress, followed by public sector banks (PSBs) and non-banking financial firms
(NBFCs). In the case of individual loans, small financing banks (SFBs) had the highest
proportion of customers benefiting from the moratorium, followed by UCBs and NBFCs.
Initially, in April 2020, around two-thirds of PSB customers and half of private sector bank
(PVB) customers availed of the moratorium. However, by August 31, 2020, the situation had
reversed, with PVBs having a larger customer base under the moratorium, largely due to a
fourfold increase in MSME customers utilizing this benefit. PSBs still accounted for a
significant customer base across various categories, particularly individuals, who had opted
out of the moratorium.

At the end of September 2020, large borrower accounts (with exposure of '5 crore or more)
accounted for 79.8% of NPAs and 53.7% of total loans. PSBs' gross non-performing assets
(GNPAs) ratio, as well as the ratio of restructured standard assets to total funded amounts,
both exhibited a declining trend in 2019-20. On the contrary, PVBs saw an increase in the
proportion of NPAs in such accounts. In September 2020, the percentage of special mention
accounts (SMA-0) increased dramatically. This might be the first hint of tension once the

11
prohibition is lifted on August 31, 2020. However, the percentage of other SMA types,
namely SMA-1 and SMA-2, remained relatively low.

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The Indian banking sector has been significantly impacted by the COVID-19 pandemic. Here
are some of the key effects:

1. Loan moratoriums: The Reserve Bank of India (RBI) provided a loan moratorium period
of six months to borrowers, which was later extended to a total of nine months. This move
helped borrowers cope with the financial stress caused by the pandemic. However, it also led
to a rise in the non-performing assets (NPAs) of banks.

2. Reduction in interest rates: In response to the pandemic, the RBI reduced the repo rate (the
rate at which it lends to banks) to support the economy. This led to a reduction in interest
rates on loans, which encouraged borrowing but also reduced the profitability of banks.

3. Digital transformation: The pandemic has accelerated the shift towards digital banking in
India. Banks have had to invest in digital infrastructure to ensure that their customers can
continue to access banking services during the pandemic. This has led to a surge in online
banking transactions and the adoption of digital payments.

4. Impact on the economy: The pandemic has had a significant impact on the Indian
economy, which has in turn affected the banking sector. The lockdowns and disruptions to
supply chains have resulted in reduced economic activity, which has led to lower demand for
loans and lower profits for banks.

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CHAPTER II

14
Research Methodology

Need for study:

1. Economic consequences: The Indian economy has been significantly affected by the
COVID-19 pandemic, and the banking sector plays a critical role in this economy. Analyzing
the effects of COVID-19 on the banking sector can offer valuable insights into the broader
economic repercussions of the pandemic.

2. Policy considerations: The Indian government and the Reserve Bank of India (RBI) have
implemented various policies to mitigate the impact of COVID-19 on the banking sector. An
examination of the impact of COVID-19 on the banking industry can assist policymakers in
evaluating the effectiveness of these measures and identifying areas that require further
attention.

3. Business resilience: The COVID-19 crisis has underscored the importance of having robust
business continuity plans in place for banks. Assessing the impact of COVID-19 on the
banking sector can help banks evaluate their preparedness for future disruptions and identify
opportunities for enhancing their resilience.

4. Digital transformation: The COVID-19 pandemic has accelerated the adoption of digital
banking in India. Investigating the impact of COVID-19 on the banking sector can shed light
on the progress and effectiveness of digital banking initiatives.

5. Risk management: The pandemic has heightened the risk of loan defaults and non-
performing assets (NPAs) for banks. A study on the impact of COVID-19 on the banking
sector can provide insights into the efficacy of risk management strategies and suggest areas
for improvement.

In summary, examining the consequences of COVID-19 on the Indian banking sector is

crucial for understanding the challenges and prospects the sector faces in the aftermath of the
pandemic.

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Objective of the study:
The objective of the study of the impact of COVID-19 on the Indian banking sector is to
assess the extent of the impact of the pandemic on the sector, and to identify the challenges
and opportunities that have arisen as a result.

The main objectives of the study are:

1. Assessing the impact of COVID-19 on the financial performance of banks, including their
profitability, asset quality, and capital adequacy.

2. Identifying the factors that have contributed to the impact of COVID-19 on the banking
sector, such as loan moratoriums, reductions in interest rates, and disruptions to the economy.

3. Assessing the effectiveness of policy measures implemented by the government and the
Reserve Bank of India (RBI) to support the banking sector during the pandemic.

4. Evaluating the preparedness of banks for future disruptions and identifying areas for
improvement in business continuity planning.

5. Assessing the impact of COVID-19 on the adoption of digital banking initiatives and
identifying the opportunities for further digital transformation in the sector.

6. Identifying the risks and challenges that have arisen as a result of COVID-19, such as the
risk of loan defaults and non-performing assets (NPAs), and evaluating the effectiveness of
risk management strategies.

The objective of the study of the impact of COVID-19 on the Indian banking sector is to
provide a comprehensive understanding of the challenges and opportunities facing the sector
in the wake of the pandemic, and to identify strategies for building resilience and ensuring
sustainable growth in the future.

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Literature Review
1. Financial performance: According to a report from the Reserve Bank of India (RBI),
Indian banks experienced a significant decline in profitability during the first half of 2020-21
as a result of the COVID-19 impact. The study also revealed a deterioration in asset quality,
with an increase in non-performing assets (NPAs) and restructured assets.

2. Policy measures: To support the banking sector during the pandemic, the Indian
government and the RBI implemented various policy measures, such as loan moratoriums,
interest rate reductions, and liquidity support. A study conducted by the National Institute of
Bank Management (NIBM) concluded that these measures effectively mitigated the impact of
COVID-19 on the banking sector.

3. Digital transformation: The COVID-19 pandemic accelerated the adoption of digital

banking in India. A study conducted by McKinsey & Company highlighted a significant
surge in the use of digital payment platforms and online banking services during the
pandemic.

4. Risk management: The impact of COVID-19 increased the risk of loan defaults and NPAs
in the Indian banking sector. Research conducted by CRISIL revealed a significant
deterioration in the asset quality of Indian banks, with the NPAs of public sector banks
reaching 9.7% by September 2020.

5. Business continuity: The COVID-19 pandemic emphasized the importance of business

continuity planning for banks. A study conducted by Deloitte identified various operational
challenges faced by Indian banks during the pandemic, including disruptions in supply
chains, technological issues, and cybersecurity threats.

In summary, research indicates that the COVID-19 pandemic had a notable impact on the
Indian banking sector, resulting in reduced profitability and deteriorating asset quality.
However, the implementation of policy measures by the government and the RBI proved
effective in mitigating these effects, while also accelerating the digital transformation of the
sector. Looking ahead, there is an emphasis on the importance of robust risk management
practices and business continuity planning to ensure resilience in the face of future
disruptions.

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One of the main areas of concern for the Indian banking sector during the pandemic has been
the impact on asset quality. The RBI had issued a moratorium on loan repayments for
borrowers affected by COVID-19, which was later extended. This has resulted in a
significant increase in non-performing assets (NPAs) in the banking sector. Many banks have
also had to make provisions for expected credit losses due to the economic uncertainty caused
by the pandemic.
The pandemic has highlighted the need for greater financial inclusion in India, particularly in
rural areas. The government has launched various initiatives to increase access to banking
services, such as the Pradhan Mantri Jan Dhan Yojana (PMJDY) and the Bharat Bill Payment
System (BBPS). However, challenges remain in terms of infrastructure, literacy, and trust.

The RBI has implemented various measures to support the banking sector during the
pandemic. These include the moratorium on loan repayments, relaxation of certain regulatory
requirements, and liquidity support through various measures such as the Targeted Long-
Term Repo Operations (TLTRO) and the Marginal Standing Facility (MSF). The government
has also announced various fiscal measures to support the economy, such as the Atmanirbhar
Bharat package.

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Theoretical Framework

The theoretical framework for studying the impact of COVID-19 on the Indian banking
sector could be based on several theories and models. Here are some key theories and models
that could be relevant:

 Contingency theory: This theory suggests that organizations must adapt to changes in
their environment to survive and thrive. In the context of the Indian banking sector,
the COVID-19 pandemic represents a significant environmental change, and banks
must adapt their strategies and operations to remain resilient.

 Resource-based view: This theory suggests that organizations must leverage their
resources and capabilities to gain a competitive advantage. In the context of the Indian
banking sector, banks with strong digital capabilities and risk management
frameworks were better able to withstand the impact of COVID-19.

 Systems theory: This theory suggests that organizations are composed of

interdependent subsystems that must work together to achieve their goals. In the
context of the Indian banking sector, the impact of COVID-19 on one subsystem,
such as credit risk management, can have ripple effects throughout the organization.

 Stakeholder theory: This theory suggests that organizations must consider the interests
of all their stakeholders, including customers, employees, shareholders, and society at
large. In the context of the Indian banking sector, banks must balance the interests of
these stakeholders while navigating the challenges posed by the pandemic.

 Technology acceptance model: This model suggests that the adoption of new
technologies depends on the perceived usefulness and ease of use of the technology.
In the context of the Indian banking sector, the adoption of digital banking during the
pandemic was influenced by factors such as the availability of digital infrastructure,
customer preferences, and regulatory support.

The theoretical framework for studying the impact of COVID-19 on the Indian banking
sector would involve a multi-disciplinary approach, incorporating insights from theories and
models in areas such as organizational behavior, strategic management, information systems,
and finance.

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There have been several studies conducted on the Indian banking sector and its response to
the COVID-19 pandemic. Here are some of the key findings from these studies:

1. A study conducted by KPMG India in August 2020 found that the pandemic had a
significant impact on the profitability of Indian banks. The study revealed that the net profit
of Indian banks declined by 18% in the first quarter of the fiscal year 2020-21, compared to
the same period in the previous year. The study also highlighted that banks had to increase
their provisioning for bad loans in response to the pandemic.

2. Another study conducted by Deloitte India in May 2020 found that Indian banks were
facing challenges in managing their liquidity in the wake of the pandemic. The study revealed
that the lockdown had resulted in a slowdown in economic activity, which had impacted the
cash flows of businesses and individuals. This, in turn, had led to an increase in non-
performing assets (NPAs) and provisioning requirements for banks.

3. A study conducted by the Indian Institute of Management (IIM) Ahmedabad in October

2020 found that the pandemic had accelerated the adoption of digital banking in India. The
study revealed that customers were increasingly using online and mobile banking services,
and banks were launching new digital services in response to the pandemic. The study also
highlighted the importance of cybersecurity in the context of digital banking.

4. A study conducted by the Reserve Bank of India (RBI) in June 2020 found that the
pandemic had led to a decline in credit demand from the corporate sector. The study revealed
that the credit growth of Indian banks had declined to 6.5% in May 2020, compared to 11.4%
in the same period in the previous year. The study also highlighted the importance of credit
guarantee schemes in providing support to small businesses during the pandemic.

5. A study conducted by the Confederation of Indian Industry (CII) in May 2020 found that
Indian banks were taking measures to support their customers during the pandemic. The
study revealed that banks had introduced measures such as loan moratoriums and interest rate
reductions to provide relief to customers affected by the pandemic. The study also
highlighted the importance of collaboration between banks and the government in responding
to the pandemic.

Overall, the studies conducted on the Indian banking sector and its response to the COVID-
19 pandemic highlight the challenges faced by banks in managing their profitability,
liquidity, and credit quality during the pandemic. The studies also underscore the importance

20
of digital banking and collaboration between banks and the government in responding to the
pandemic.

The adoption of digital banking in response to the pandemic, including the use of online and
mobile banking by customers and the digital services offered by banks
The COVID-19 pandemic has accelerated the adoption of digital banking in India. With
social distancing measures in place and people being advised to stay at home, customers are
turning to online and mobile banking as a safe and convenient way to conduct their banking
transactions.
The adoption of digital banking in India has been growing steadily over the past few years,
but the pandemic has further accelerated this trend. Banks are offering a range of digital
services to their customers, including mobile banking apps, internet banking, and digital
wallets. These services allow customers to transfer money, pay bills, and make purchases
online, without the need to visit a physical bank branch.
According to a report by the Reserve Bank of India, the volume of digital transactions in
India increased by 58% during the first half of 2020, compared to the same period in the
previous year. Mobile banking transactions increased by 85%, while internet banking
transactions increased by 28%.
Several banks in India have also launched new digital services in response to the pandemic.
For example, ICICI Bank introduced a video banking facility that allows customers to have a
face-to-face conversation with a bank representative through a video call. HDFC Bank
launched an e-Kisaan Dhan app that enables farmers to avail loans online.
The adoption of digital banking has not only benefited customers, but also banks. Digital
transactions are less expensive than traditional transactions, and banks can save on costs
associated with maintaining physical bank branches. This has enabled banks to improve their
profitability in a challenging economic environment.
However, the adoption of digital banking is not without its challenges. Cybersecurity is a
major concern, and banks need to ensure that their digital platforms are secure and protected
from cyber threats. Additionally, there is a risk of exclusion for those who do not have access
to digital banking services or are not familiar with their usage. Therefore, banks need to
ensure that they provide adequate support to customers who are new to digital banking.
Overall, the adoption of digital banking in India has been accelerated by the COVID-19
pandemic, and it is likely that this trend will continue in the post-pandemic era. Banks need to
continue to invest in digital technologies to provide convenient and safe banking services to
their customers.

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CHAPTER III

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Company Profile
Banks are an essential part of the financial system and play a crucial role in the economy's
growth and development. Among the many banks that operate in India, HDFC Bank, Axis
Bank, and Bank of Baroda (BOB) and State Bank of India(SBI) are some of the most
prominent players.

SBI:
SBI, or the State Bank of India, is one of the largest public sector banks in India. Founded in
1955, SBI has a rich history and has played a crucial role in the development of India's
banking industry. The bank is headquartered in Mumbai and has a vast network of branches
across the country and around the world. In this essay, we will discuss the history,
organization, and role of SBI in India's economy.

History
SBI traces its origins back to the Bank of Calcutta, which was established in 1806. Over the
years, the bank merged with other banks, including the Bank of Bombay and the Bank of
Madras, to form the Imperial Bank of India in 1921. In 1955, the Indian government
nationalized the Imperial Bank of India and renamed it the State Bank of India.

Organization
SBI is a public sector bank that is owned by the Indian government. The bank is managed by
a board of directors, which is appointed by the government. The board is responsible for the
overall direction of the bank, including its strategic planning and policy decisions.
SBI has a vast network of branches and ATMs across India and around the world. The bank
offers a wide range of financial services, including personal banking, corporate banking, and
investment banking. SBI also has a subsidiary, SBI Card, which provides credit cards to
customers.
Role in India's Economy
SBI has played a crucial role in the development of India's banking industry. The bank has
been instrumental in providing financial services to people in rural areas and promoting
financial inclusion. SBI has also been at the forefront of implementing the government's
initiatives to digitize the banking sector.
SBI has played a significant role in financing infrastructure projects in India. The bank has
provided loans to various sectors, including power, transportation, and telecommunications.

23
SBI has also played a critical role in supporting small and medium-sized enterprises (SMEs)
in India. The bank has launched several initiatives to provide financial support and training to
SMEs, which are essential for the growth of the Indian economy.

Axis Bank:
Axis Bank is one of the leading private sector banks in India, with a wide range of financial
products and services for individuals, businesses, and corporates. Established in 1993, Axis
Bank has grown to become a major player in the Indian banking industry, with a strong
presence in both urban and rural areas of the country.One of the key strengths of Axis Bank is
its customer-centric approach, which is reflected in its product offerings and services. The
bank offers a range of savings and deposit accounts, loans, credit cards, insurance products,
and investment options to meet the diverse needs of its customers. Its innovative products and
services, coupled with a strong distribution network and digital capabilities, have enabled
Axis Bank to cater to a wide range of customers across various segments.
Axis Bank has also established itself as a leader in digital banking, with a range of digital
channels and platforms for customers to access banking services. The bank's mobile app and
internet banking platforms are user-friendly and offer a seamless banking experience. Axis
Bank has also launched several digital initiatives, such as the 'Axis Aha!' app, which offers a
range of lifestyle services to customers, and 'Ping Pay,' a mobile payment app that allows
customers to transfer money to anyone using their mobile number.Axis Bank has a strong
focus on innovation and technology, which has enabled it to stay ahead of the competition.
The bank has partnered with several fintech companies to offer innovative products and
services, such as the 'Axis Bank- Freecharge' partnership, which allows customers to recharge
their mobile phones and DTH connections through the Axis Bank mobile app.
Axis Bank has a strong corporate governance framework and has been recognized for its
ethical business practices. The bank has won several awards and accolades, including the
'Best Bank- Domestic' award at the Business Today MindRush Awards in 2020, and the 'Best
Digital Bank- Retail' award at the Asiamoney Best Banks Awards in 2019.
However, Axis Bank has faced some challenges in recent years. The bank's asset quality has
been impacted by the economic slowdown and the Covid-19 pandemic, which has led to an
increase in non-performing assets (NPAs) and provisioning requirements. The bank has also
faced regulatory issues, such as the RBI's restrictions on its card issuance business in 2019.

24
Bank of Baroda(BOB):
Bank of Baroda (BOB) is one of the largest public sector banks in India, with a rich history
dating back to 1908. It has a strong presence in the Indian banking sector, as well as overseas.
The bank offers a wide range of banking and financial services, including personal and
corporate banking, investment banking, wealth management, and insurance.BOB has a large
network of branches and ATMs across India, as well as branches in 21 other countries,
including the United States, United Kingdom, United Arab Emirates, and China. This
international presence has helped the bank to expand its customer base and provide its
services to a wider audience.
The bank's commitment to innovation has helped it to stay ahead of the curve in the highly
competitive banking industry. It has embraced digital banking, offering a range of online and
mobile banking services that make it easy for customers to access and manage their accounts
from anywhere. The bank has also launched several digital initiatives, such as the Baroda
Finathon Challenge, which encourages innovation in the fintech industry.
BOB's focus on customer service has helped it to build a loyal customer base. The bank
offers a range of personalized services, including personal loans, home loans, and car loans,
which are tailored to meet the unique needs of each customer. It also provides a range of
wealth management and investment services, including mutual funds and insurance products,
which are designed to help customers achieve their financial goals.

In addition to its focus on customers, BOB is also committed to social responsibility. The
bank has launched several initiatives aimed at supporting the community, including the
Baroda Swachh Vidyalaya Program, which focuses on improving the sanitation and hygiene
facilities in schools, and the Baroda Gramin Vikas Program, which supports rural
development projects.
However, like any other bank, BOB has faced challenges over the years. One major challenge
has been the non-performing assets (NPAs) issue, which has affected many banks in India.
BOB has taken steps to address this issue, including implementing stricter lending policies
and increasing its focus on recovery of bad loans.

25
HDFC Bank:
HDFC Bank, founded in 1994, is one of India's leading private sector banks, with its
headquarters in Mumbai. The bank has a presence in over 2800 cities across India, with more
than 6,000 branches and over 16,000 ATMs. HDFC Bank has been consistently ranked
among the top banks in India in terms of market capitalization, profitability, and customer
satisfaction.
One of the key factors contributing to HDFC Bank's success is its customer-centric approach.
The bank has a reputation for providing high-quality customer service, which has earned it a
loyal customer base. HDFC Bank offers a range of products and services, including personal
banking, corporate banking, and wholesale banking.
HDFC Bank's personal banking services include savings accounts, current accounts, fixed
deposits, loans, credit cards, and insurance. The bank's loans and credit card offerings are
among the most popular in India, and the bank has won several awards for its credit card
services.
The bank's corporate banking services include cash management, trade finance, working
capital finance, and corporate loans. HDFC Bank is known for its innovative and customized
solutions for corporate clients, and has won several awards for its corporate banking services.
HDFC Bank's wholesale banking division provides services to large corporates, government
entities, and financial institutions. The bank offers a range of services, including treasury and
capital markets, investment banking, and transaction banking. HDFC Bank is one of the
leading players in India's wholesale banking space.
Another key factor contributing to HDFC Bank's success is its use of technology. The bank
has invested heavily in technology, and has developed a range of innovative products and
services that have helped it stay ahead of the competition. HDFC Bank was one of the first
banks in India to launch internet banking, mobile banking, and digital wallets. The bank's
digital offerings have been well-received by customers, and have helped the bank increase its
customer base and improve customer satisfaction.
HDFC Bank's strong financial performance is another reason for its success. The bank has
consistently delivered strong financial results, with healthy growth in revenue, profit, and
assets. The bank's strong financial position has enabled it to invest in technology and expand
its operations, both within India and globally.

26
Industrial Profile:
The Indian banking system is one of the largest in the world and plays a crucial role in the
country's economic development. It comprises of a wide range of institutions that cater to the
financial needs of individuals, businesses, and the government.
Here are some key features of the industrial profile of the Indian banking system:
1. Public Sector Dominance: The Indian banking system is dominated by public sector
banks, which account for about 70% of the total banking assets. The largest public
sector banks in India include State Bank of India, Bank of Baroda, Punjab National
Bank, and Canara Bank.

2. Private Sector Growth: The private sector banks have grown rapidly in recent years
and account for around 30% of the total banking assets. The largest private sector
banks in India include HDFC Bank, ICICI Bank, and Axis Bank.

3. Cooperative Banks: India also has a large network of cooperative banks, which are
primarily focused on meeting the credit needs of farmers and rural communities.
These banks are jointly owned and managed by their members.

4. Branch Network: The Indian banking system has a vast branch network, with over
1.5 lakh bank branches spread across the country. This extensive network ensures that
banking services are easily accessible to people in even remote areas.

5. Technology Adoption: Indian banks have been quick to adopt new technologies and
offer digital banking services to their customers. This has led to the growth of online
and mobile banking, which has made banking more convenient and accessible to a
wider population.

6. Regulatory Framework: The Indian banking system is regulated by the Reserve Bank
of India (RBI), which is the central bank of the country. The RBI sets policies and
guidelines for banks and ensures their compliance through regular inspections and
audits.

The Indian banking system has made significant strides in recent years, with a focus on
financial inclusion and technological advancements. Despite challenges such as high levels of

27
non-performing assets and increasing competition, the Indian banking sector is expected to
continue to grow and play a crucial role in the country's economic development.

CHAPTER IV

28
Data Analysis

To analyze the correlation between the impact of COVID-19 on the Indian banking sector,
we can look at the following data:

1. GDP Growth: The GDP growth rate of India declined sharply due to the pandemic, which
had a direct impact on the banking sector. As per data from the Ministry of Statistics and
Programme Implementation, India's GDP contracted by 7.7% in 2020-21, the worst
performance in four decades. This contraction led to reduced demand for loans and impacted
the asset quality of banks.

2. Loan Disbursement: As mentioned earlier, loan disbursement by banks slowed down

during the pandemic due to the uncertainty surrounding the economy. This slowdown in loan
disbursement was mainly due to a lack of demand from borrowers. The RBI's data shows that
loan disbursements declined by 0.8% in 2020-21 compared to the previous year.

3. Non-Performing Assets (NPAs): The asset quality of banks deteriorated during the
pandemic, leading to an increase in NPAs. According to the RBI, the gross NPAs of banks
increased from 7.5% in September 2020 to 7.8% in December 2020. This increase was
mainly due to stress faced by sectors such as aviation, hospitality, and real estate.

4. Relief Measures: The RBI announced several relief measures to support the banking sector
during the pandemic. These measures included a moratorium on loan repayments, reduction
in interest rates, and liquidity support to banks. These measures helped mitigate some of the
negative impacts of the pandemic on the banking sector.

5. Digital Banking: The pandemic accelerated the adoption of digital banking in India. With
physical branches being shut down, customers turned to online and mobile banking for their
transactions. Banks also offered various digital services such as video KYC (know your
customer) and online loan applications to meet the changing demands of customers.

29
From the above data, we can observe a negative correlation between GDP growth and loan
disbursement by banks. As the GDP contracted, there was reduced demand for loans, leading
to a slowdown in loan disbursement by banks. Additionally, the increase in NPAs shows a
negative correlation between economic growth and asset quality of banks. However, the relief
measures announced by the RBI helped mitigate some of these negative impacts on the
banking sector. The acceleration of digital banking shows a positive correlation between the
pandemic and the adoption of technology in the banking sector.
For my research, I selected a sample of four banks, consisting of two public sector banks and
two private sector banks. I analyzed their data over a span of five years, specifically including
the period from 2019 to 2020.

I. Axis Bank:

Year NPAs(Cr) Net Profit(Cr) Total Advances(Cr)

2014-15 1316.71 7357.82 281083.03
2015-16 2522.14 8223.66 338774
2016-17 8626.55 3679.28 373069
2017-18 16591.71 275.68 439650
2018-19 11275.60 4676.61 494798
2019-20 9360.41 1627.22 571424

30
Interpretation:
According to the above graph, NPAs for the 2014–15 fiscal year were Rs. 1316.71 CR and
net profit was Rs. 7357.82 CR. The bank's net profit and non-performing assets (NPAs)
increased in the next year, to Rs. 7357.82 CR and Rs. 1316.71 CR, respectively. The cause of
this is that the bank's net profit is significantly higher than its NPAs. NPAs therefore have a
small or insignificant impact on bank profits in 2014–15 and 2015–16.
In the fiscal year 2016–17, the bank's net profit dropped to Rs 3679.28 CR, and its NPAs
outpaced its net profit. The NPAs now total Rs. 8626.55 CR. Thus, it is obvious that the
abrupt rise in the bank's NPAs had a significant impact on the bank's profitability in the
2016–17 fiscal year. There was more liquidity and very little demand for corporate credit
during the 2016–17 fiscal year, which is why there was a significant rise in NPAs. Even if the
company managed to boost loan advances in 2016–17, the rise in NPAs wiped out all of the
gains.
The bank's NPAs increased by two times in 2017–18 compared to 2016–17. The profitability
of the bank for the year was significantly damaged once more by this. The bank's earnings
decreased to Rs 275.68 CR. The net profit increased while the NPAs decreased in the 2018–
19 fiscal year. As a result, it is evident that NPAs and bank net profit have an inversely
proportionate connection.

Net profit and NPAs both show a decline in 2019–20.

1. There are fewer NPAs
2. Loan disbursements are rising as well.
Both of the aforementioned characteristics indicate that the net profit should rise. But in
reality, it isn't. The following are the causes for this:
1. Net profit is lower than NPAs
2. The Indian economy is greatly impacted.

31
3. Due to the pandemic, the bank raised its NPA provisions for the year. The three
aforementioned factors caused the bank's profitability to decline for the 2019–20 fiscal year.

II. State Bank of India

Year NPAs(Cr) Net Profit(Cr) Total Advances(Cr)
2014-15 27590.58 13101.90 1300026.39
2015-16 42365.78 9950.65 1463700.42
2016-17 54065.61 10484.10 1571078.38
2017-18 110854.70 -6547.45 1934880.19
2018-19 55894.74 862.23 2185876.92
2019-20 51871.30 14488.11 2325289.56

32
Interpretation:
From the aforementioned charts, it is evident that the State Bank of India's NPAs from the
years 2014–15 to 2019–20 are higher than its profit. The annual sharp increase in total
advances may be the cause of this. The bank's NPAs are falling in 2018-19 compared to the
previous year, and profitability has increased as well, rising to 862.23 crores from -6547.45
crores. The cause of this growth was:
1. Public investments
2. The personal loan market's demand
3. More effective risk taking

The above information on advances and non-performing assets (NPAs) makes it clear that the
NPA ratio in 2017–18 was 5.72%; however, in 2018–19, it dropped to 3.01%, which
increased profitability.
After 2018–19, similar results were discovered in 2019–20 despite the Covid–19 Pandemic.
Reasons include:
1. Digital payments
2. Increasing Interest Income as Advances Rise
3. Demand for corporate credit
4. MSME financing

33
Therefore, we can conclude that the financial crisis in the COVID-19 pandemic, which
resulted in a source of income for SBI in the form of interest on loans, as well as the decline
in NPAs, led to a high demand for advances in the 2019–20 fiscal year.

III. Bank of Baroda

Year NPAs(Cr) Net Profit(Cr) Total Advances(Cr)

2014-15 8069.49 3398.44 428065.14
2015-16 19406.46 -5395.54 383770.18
2016-17 18080.18 1383.14 383259.22
2017-18 23482.65 -2431.81 427431.83
2018-19 48232.76 433.52 468818.74
2019-20 69381.43 546.19 690120.73

34
Interpretation:

According to the aforementioned graph, NPAs for the 2014–15 fiscal year were Rs. 8069.49
CR and net profit was Rs. 3398.44 CR. The following year, NPAs dramatically increased
with a total of Rs. 19406.46; however, as a result of the dramatic increase in NPAs, Net Profit
fell and a loss of Rs. 5395.54 CR was realised. By successfully reducing its NPAs, which
stood at 18080.18 CR in 2016–17, BOB was able to restore its profit of Rs. 1383.14 CR.
Despite the fact that NPAs and advances are essentially unchanged from the prior year, they
still turned a profit. Corporate financial services, international operations, retail financial
services, business financial services, the world treasury, and rural financial services are all
potential sources of profit.
Again, due to a sharp increase in NPAs of Rs. 23482.65 CR, BOB was unable to turn a profit
in the 2017–18 fiscal year and suffered a loss of Rs. 2431.81 CR. NPAs and profitability
therefore have an inverse relationship in the 2017–18 fiscal year.
The bank's NPAs nearly doubled in 2018–19, but profits also rose compared to the previous
year. Profitability may have occurred because other sources of income grew and more than
made up for NPA losses.
NPAs and Profit both increased to 69381.43 CR and 546.19 CR in the following year 2019–
20, respectively. The increase in advances, specifically 690120.73 CR, may be the cause,
which also increased interest income and profitability. The Covid-19 pandemic may have
caused a sudden rise in advances because people urgently needed credit.

35
 IV. HDFC Bank

Year NPAs(Cr) Net Profit(Cr) Total Advances(Cr)

2014-15 896.28 10215.92 3654965.03
2015-16 1320.37 12296.21 464593.96
2016-17 1843.99 14549.64 554568.20
2017-18 2601.02 17486.73 658333.09
2018-19 3214.52 21078.17 819401.22
2019-20 3542.36 26257.32 993702.88

36
Interpretation:

From 2014–15 to 2019–20, HDFC Bank's NPAs, Net profit, and loan advances all increased.
Increased NPAs have no discernible impact on net profit, as can be seen. The same is due to
the net profit and loan advances. The companies' net profit is a lot higher than their NPAs.
NPAs have thus had no impact on the company's profitability. In five years, their loan
advances increased from Rs 265495.03 CR to Rs 993702.88 CR, or roughly triple the loan
advances in 2014–15. The net profit will increase as the loan advances. NPAs are therefore
not preventing the bank from being profitable.

37
Due to the moratorium that banks granted to defaulters, total advances in 2019–20 increased
to Rs 993702.88 CR. As a result of the imposed moratorium, their advances have increased
while NPAs have not increased as much as they otherwise would have. In addition, their
NPAs pale in comparison to their net profits over the course of five periods. Thus, even
though the entire Indian economy was in decline, there was little effect on the bank's net
profit.

Correlation AXIS SBI BOB HDFC BANK

BANK
Net Profit & NPAs -0.90 -0.90 0.04 0.97
Net Profit & Total -0.70 -0.30 0.23 1.00
Advances

1. When the correlation is below 1, it indicates a reciprocal connection between the two
variables.
2. When the correlation is close to 0, it suggests no relationship between the two variables.
3. When the correlation falls between 0.1 and 0.5, it signifies a moderate influence of one
variable on the other.
4. When the correlation exceeds 0.5, it denotes a substantial impact of one variable on the
other.
Axis Bank:
The correlation coefficient between net profit and non-performing assets is -0.90,
indicating a strong negative relationship. Similarly, there is a negative correlation of -
0.7 between the total advances and net profit, highlighting a reciprocal association.
This reciprocal relationship can be attributed to the relatively smaller profit compared
to the bank's non-performing assets, which have a more pronounced and adverse
impact on profitability. Despite the growth in advances, the presence of higher non-
performing assets hampers the bank's overall profitability.

SBI:
The correlation between net profit and non-performing assets is -0.90, indicating a
strong negative relationship. Additionally, the correlation between total advances and
net profit is -0.3. The observed correlations align with the explanation provided,
where there exists a reciprocal relationship between non-performing assets and net
profit. SBI's higher non-performing assets compared to net profit contributed to this
relationship. In the fiscal year 2019-20, the bank experienced an increase in loan
advances due to the demand for credit during the pandemic. Moreover, the
moratorium offered to customers led to a decrease in non-performing assets, resulting
in improved profitability. However, it is anticipated that the bank's profitability may
be impacted in the future due to the increased provisions required for non-performing
assets, which could affect the bottom line.

38
 BOB:
The correlation coefficient between net profit and non-performing assets is 0.04,
indicating a weak positive relationship. Similarly, the correlation between total
advances and net profit is 0.23. The correlation of 0.04 suggests a lack of association
between net profit and non-performing assets for BOB. The fluctuations in net profits
over the past five years may contribute to this finding, and the varying levels of loan
advances have also influenced net profit. In the fiscal year 2019-20, there was an
increase in loan advances, and BOB utilized the RBI's Covid-19 restructuring plans
for loans amounting to Rs 7800 crore to address liquidity needs.

HDFC Bank:
The correlation coefficient between net profit and non-performing assets is 0.97,
indicating a strong positive relationship. Additionally, the correlation between total
advances and net profit is 1, reflecting a perfect positive correlation. The positive
relationship between net profit and non-performing assets can be attributed to HDFC
Bank's significantly higher profitability compared to non-performing assets. As a
result, the increasing non-performing assets have minimal to no impact on the bank's
overall profitability. Over the period from 2015 to 2020, the bank witnessed a
substantial increase in advances, which aligned with the growth in net profit.
 The COVID-19 pandemic has had a significant impact on the Indian economy,
including the banking sector. Non-performing assets (NPAs), or bad loans, of private
banks in India have been affected by the pandemic.

 As a result of the pandemic, many borrowers have faced financial difficulties due to
loss of income, business closures, and job losses. This has resulted in a rise in NPAs
across the banking sector in India, including private banks.

 According to the Reserve Bank of India (RBI), the gross NPA ratio of private sector
banks increased from 4.2% in September 2020 to 4.7% in March 2021. This increase
was mainly due to stress in the retail and small business loan portfolios of these
banks.

 The RBI has taken various measures to address the impact of the pandemic on the
banking sector, including providing regulatory forbearance on loan repayments and
providing liquidity support to banks. However, the full extent of the impact of the
pandemic on the banking sector, including private banks, is still uncertain.

 Overall, the COVID-19 pandemic has led to a rise in NPAs of private banks in India,
and the long-term impact of this trend on the banking sector is yet to be fully
understood.

39
  The COVID-19 pandemic has had a significant impact on the profitability of private
banks in India. Due to the pandemic, economic activity in the country slowed down,
and many businesses faced financial difficulties. As a result, the demand for loans and
other banking services declined, affecting the revenue of private banks.

 In addition, the RBI's regulatory measures, such as providing a moratorium on loan

repayments and a reduction in interest rates, have also affected the profitability of
private banks. The reduction in interest rates has led to a decline in the net interest
margin (NIM), which is the difference between the interest earned on loans and the
interest paid on deposits.

 According to the financial results reported by private banks in India, their profits have
been impacted by the pandemic. For example, in the first quarter of the financial year
2021-22, many private banks reported a decline in their net profits compared to the
same period the previous year.

 However, some private banks have been able to maintain their profitability by
focusing on their digital platforms and leveraging technology to offer their services
remotely. Additionally, the Indian government's economic stimulus packages and
other relief measures have helped to support businesses and individuals, which may
indirectly benefit private banks.

 Overall, the COVID-19 pandemic has had a negative impact on the profitability of
private banks in India, but the extent of the impact varies depending on the bank's
business model, customer segment, and digital capabilities.

The COVID-19 pandemic has presented numerous challenges for the Indian banking sector.
Here are some of the most significant challenges faced by the sector:
1. Liquidity management: The pandemic has resulted in a slowdown in economic activity,
leading to cash flow challenges for businesses and individuals. This has resulted in an
increase in non-performing assets (NPAs) and provisioning requirements for banks, making
liquidity management a significant challenge for the sector.

2. Credit quality: The pandemic has resulted in a decline in credit demand from the corporate
sector, leading to a decline in credit growth for banks. The uncertainty caused by the
pandemic has also resulted in an increase in credit risk, making it challenging for banks to
maintain their credit quality.

40
3. Profitability: The pandemic has resulted in a decline in economic activity, leading to a
decline in the profitability of banks. With interest rates at historic lows, the net interest
margin (NIM) of banks has also declined, making it challenging for banks to maintain their
profitability.

4. Digital transformation: The pandemic has accelerated the adoption of digital banking, and
banks are now under pressure to adopt digital technologies to remain competitive. This
requires significant investments in technology and infrastructure, which can be a challenge
for banks, particularly smaller ones.

5. Cybersecurity: With the increased adoption of digital banking, there is a heightened risk of
cyber attacks. Banks need to ensure that their cybersecurity measures are robust and effective
to protect their customers' data and prevent financial fraud.

Overall, the challenges faced by the Indian banking sector due to the COVID-19 pandemic
are significant, and banks need to take proactive measures to address these challenges. This
may require greater collaboration between banks and the government, as well as increased
investments in technology and infrastructure.

Measures and Relief by RBI in response to Covid – 19

The Reserve Bank of India (RBI) implemented various measures aimed at enhancing
liquidity, promoting credit flow, and reducing stress in the banking and financial
services sector. These actions included:

1. Repo Rate:
The RBI decided to decrease the repo rate by 0.75%, bringing it down to 4.4%. This
reduction was the first since October 2019 when the repo rate stood at 5.15%.

2. Reverse Repo:
The central bank also lowered the rate on reverse repo by 0.90%, resulting in a current
rate of 3.35%. This move aimed to address the significant daily deposits of around Rs
3 lakh crore made by banks with the RBI.

3. Loan Moratorium:
To provide relief to the middle class, the RBI Governor announced a three-month
moratorium on term loans outstanding as of 1 March 2020. This measure applied to

41
 various lending institutions, including commercial banks, cooperative banks, and non-
banking financial companies (NBFCs).

4. Cash Reserve Ratio (CRR):

The CRR, which refers to the portion of deposits banks must maintain with the RBI,
was reduced by 100 basis points (bps), from 3% to the new level. This adjustment,
effective from 28 March, injected Rs. 1,37,000 crores into the system.

5. Long Term Repo Operations (LTRO):

The RBI introduced Long Term Repo Operations (LTRO) to enhance bank liquidity.
However, it specified that this liquidity should be utilized for non-convertible
debentures, investment-grade corporate bonds, and commercial papers.

6. Working Capital Financing:

Lenders were permitted to reassess borrowers' working capital cycles and lower
margins as a means of facilitating working capital financing. The RBI emphasized
that this adjustment would not result in an asset classification downgrade.

7. Working Capital Interest:

All lending institutions were granted a three-month interest moratorium, offering
them temporary relief.

In summary, the RBI's initiatives focused on augmenting liquidity, promoting credit

flow, and easing the financial strain experienced by borrowers and lending institutions
during the COVID-19 pandemic.

1. Deferment of NSFR:
The implementation date of the Net Stable Funding Ratio (NSFR), which requires
banks to fund their operations with sufficiently stable sources of funding in order to
lower funding risk, has been postponed to October 1, 2020. Earlier, the NSFR was
slated to go into effect on April 1st, 2020.

2. MSF:
Additionally, the Marginal Standing Facility (MSF) has been raised to 3% of SLR and
is now available through June 30, 2020. The RBI stated that this measure should give
the banking system comfort by enabling it to access an additional'1,37,000 crore of
liquidity under the LAF window in times of stress at the reduced.

3. Fresh Liquidity:
The Governor stated in his brief today that the combined effect of all the
announcements today will add 3.2% to GDP. The RBI also stated that it had added Rs
2.8 lakh crore of liquidity since February 2020, which is equal to 1.4 percent of GDP.

The implications of the pandemic for the future of the banking sector and suggesting
the possible strategies for banks to navigate the challenges posed by the pandemic

42
The COVID-19 pandemic has had a profound impact on the banking sector, and it is
likely to have long-term implications for the future of the sector. Here are some of the
implications of the pandemic for the future of the banking sector and some strategies
that banks can adopt to navigate the challenges posed by the pandemic.

1. Greater adoption of digital banking: The pandemic has accelerated the adoption of
digital banking, and this trend is likely to continue in the future. Banks need to invest
in digital technologies to remain competitive and meet the changing needs of
customers. Strategies for banks to adopt include developing user-friendly digital
banking platforms, offering personalized digital services, and investing in
cybersecurity measures to protect against cyber threats.

2. Focus on risk management: The pandemic has highlighted the importance of risk
management for banks. Banks need to have robust risk management processes and
tools in place to identify and mitigate risks effectively. Strategies for banks to adopt
include enhancing credit underwriting and monitoring processes, implementing early
warning systems, and developing stress-testing scenarios to prepare for future shocks.

3. Collaboration with the government: The pandemic has underscored the importance
of collaboration between banks and the government. Banks can work with the
government to develop policies and measures to support businesses and individuals
during times of crisis. Strategies for banks to adopt include offering loan restructuring
programs, providing financial education and support to customers, and working with
the government to develop economic recovery programs.

4. Strengthening resilience: The pandemic has demonstrated the importance of

resilience for banks. Banks need to have robust business continuity plans in place to
ensure that they can continue to operate in times of crisis. Strategies for banks to
adopt include diversifying their portfolios, increasing capital buffers, and developing
contingency plans to manage liquidity and solvency risks.

To address these challenges, policymakers, regulators, and banking sector

stakeholders can consider the following recommendations:

1. Provide targeted relief measures: The government can provide targeted relief
measures to support businesses and individuals affected by the pandemic. This could
include fiscal stimulus packages, loan moratoriums, and loan restructuring programs.
The RBI can also provide liquidity support to banks to ensure that they have sufficient
funds to meet the credit demand.

43
2. Strengthen risk management frameworks: Regulators can strengthen risk
management frameworks to ensure that banks are better equipped to manage risks.
This could include enhanced credit underwriting and monitoring processes,
developing stress-testing scenarios, and implementing early warning systems.

3. Encourage digital transformation: Policymakers can encourage digital

transformation in the banking sector by providing incentives and support to banks.
This could include providing subsidies for investments in technology and
infrastructure, promoting the development of digital payment systems, and improving
the cybersecurity infrastructure.

4. Promote collaboration between banks: Stakeholders can promote collaboration

between banks to share best practices and improve risk management frameworks.
This could include setting up industry-wide forums to discuss issues related to the
pandemic and developing standardized protocols for loan restructuring programs.

5. Strengthen consumer protection: Regulators can strengthen consumer protection

measures to ensure that customers are not exploited by banks during times of crisis.
This could include developing clear and transparent guidelines for loan restructuring
programs and ensuring that banks adhere to fair lending practices.

Addressing the challenges faced by the Indian banking sector due to the COVID-19
pandemic will require a collaborative effort from policymakers, regulators, and
banking sector stakeholders. By implementing the recommendations discussed above,
these stakeholders can work together to support the sector and ensure that it remains
resilient and sustainable.

44
CHAPTER V

45
Findings and Conclusion
The COVID-19 pandemic had varying impacts on different banks in India. Axis Bank
observed a rise in advances but a decline in profitability during the 2019-20 fiscal year
compared to previous years. In contrast, SBI experienced a sudden surge in profit and a
decrease in non-performing assets (NPAs) during the same period. This positive performance
for SBI can be attributed to factors such as their robust digital platform (SBI YONO),
increased interest income from higher advances, corporate credit demand, and MSME
lending.

Bank of Baroda, on the other hand, reported an increase in both NPAs and profit during the
pandemic year. The rise in profitability can be attributed to an increase in interest income
resulting from higher advances. However, the bank also faced a higher proportion of non-
performing assets.

HDFC Bank witnessed an increase in advances during the 2019-20 fiscal year due to the
moratorium granted to defaulters. However, this increase in advances did not lead to a
significant rise in NPAs or profit beyond what would have been expected under normal
circumstances.

In summary, the impact of the COVID-19 pandemic on different banks in India varied. While
some banks experienced a rise in advances and profitability, others faced challenges such as
increased NPAs. The implementation of moratoriums played a role in shaping the financial
performance of certain banks.
Correlation between Net profit and NPAs

Axis Bank Reciprocal Relationship

State Bank Of India Reciprocal Relationship

Bank of Baroda Indefinite Relationship

46
 HDFC Bank Positive Relationship

Correlation between Net Profit and Total Advances

Axis Bank Reciprocal Relationship

State Bank of India Reciprocal Relationship

Bank of Baroda Positive Relationship (Moderate Impact)

HDFC Bank Positive Relationship (High Impact)

In response to the pandemic, the RBI implemented reforms and measures that increased the
availability of credit at lower interest rates, reduced the daily CRR maintenance requirements
for banks, and encouraged the flow of surplus funds into the economy's productive sectors
rather than keeping them in the bank.

Conclusion
The COVID-19 pandemic has had a significant impact on the Indian banking sector, with
both short-term and long-term implications. The pandemic has led to an increase in non-
performing assets (NPAs) due to the moratorium on loan repayments, which has resulted in
higher provisioning for expected credit losses. Banks have also faced challenges in terms of
declining profits, lower credit growth, and a slowdown in economic activity.
However, the pandemic has also accelerated the adoption of digital banking in India, with
banks launching new digital products and services to meet the changing needs of customers.
The government has launched various initiatives to increase access to banking services and
support the economy, and the RBI has implemented regulatory measures to support the
banking sector during the pandemic.
Looking ahead, the Indian banking sector will need to continue to focus on digital
transformation and innovation to remain competitive in the post-pandemic era. Banks will

47
also need to address the issue of NPAs and work towards greater financial inclusion in the
country. While the pandemic has presented significant challenges for the banking sector, it
has also highlighted the need for greater resilience and adaptability in the face of uncertainty.

As a result of the COVID-19 pandemic, the Indian banking industry has faced numerous
difficulties, including a decline in credit growth, an impact on asset quality, and a decrease in
profits. The pandemic has, however, sped up the adoption of digital banking and highlighted
the need for increased spending on technology infrastructure. The government has announced
fiscal measures to support the economy, and the RBI has implemented regulatory measures to
support the banking sector. To stay competitive in the post-pandemic era, the Indian banking
industry will need to continue to prioritize digital transformation and innovation.
Despite the challenges posed by the pandemic, Indian banks' overall profitability increased in
the financial year 2020–21 compared to the prior year, according to the Reserve Bank of
India's Financial Stability Report published in July 2021. According to the report, scheduled
commercial banks' net profit increased from 44,816 crore in 2019–20 to 1,01,173 crore in
2020–21 (excluding RRBs).
During the pandemic, private sector banks have outperformed public sector banks. According
to the same report, private sector banks reported a year-over-year increase in net profits of
24.5% for the quarter ending in December 2020, compared to a decline of 37.5% for public
sector banks during the same time period. Several elements, including the government's fiscal
stimulus, regulatory forbearance, and lower provisioning requirements as a result of the
Supreme Court's decision on loan classification, can be blamed for the increase in profits of
Indian banks in the financial year 2020–21.
Several elements, including the government's fiscal stimulus, regulatory forbearance, and
lower provisioning requirements as a result of the Supreme Court's decision on loan
classification, can be blamed for the increase in profits of Indian banks in the financial year
2020–21.
Overall, the COVID-19 pandemic has had a mixed effect on the Indian banking industry,
posing both short- and long-term operational challenges. Even though the pandemic caused
disruptions in business operations and an increase in non-performing assets, banks were still
able to increase operational effectiveness and profitability thanks to the use of digital banking
services and government support programs. In the future, the banking industry will need to
take steps to address the pandemic's impact on their asset quality and overall financial
stability as well as adapt to the changing environment.

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CHAPTER VI

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BIBLIOGRAPHY

Websites
1. https://www.wikipedia.org/
2. www.investopedia.com
3. https://www.rbi.org.in/
4. https://www.axisbank.com/shareholders-corner/shareholders-information/annual-reports
5. https://sbi.co.in/web/corporate-governance/annual-report
6. https://www.hdfcbank.com/personal/about-us/investor-relations/annual-reports
7. https://www.bankofbaroda.in/annual-report.htm
8. https://timesofindia.indiatimes.com/blogs/economic-update/npas-and-its-effects-on-
banksprofitability/
9. https://www.business-standard.com/article/finance/covid-19-indian-banking-system-to-
beamongst-the-last-to-recover-says-s-p-120092400319_1.html
10. https://www.moneycontrol.com/

Journals, Reports& Books:

1. Report by CRISIL & ICRA
2. Report published by RBI
3. Mishra Ambrish Kumar, Archana Patel and Sarika Jain (Feb, 2021), “Impact of
Covid-19 Outbreak on Performance of Indian Banking Sector by “Impact of Covid-19
on Indian Economy with Special Reference to Banking Sector: An Indian
Perspective”
4. Singh Jitender , Bodla B. S. (2020) “Covid-19 Pandemic and Lockdown Impact on
India's Banking Sector: A Systemic Literature Review”
5. Joseph Ashly Lynn Joseph and Dr. M. Prakash (Jul, 2014) “A Study on Analysing the
Trend of NPA Level in Private Sector Banks and Public Sector Banks

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