The article analyses the impact of the pandemic on the banking sector in India. Utilising data on Indian banks, it addresses two questions: fi rst, what was the magnitude of the impact on bank lending across ownership? Second, what was the impact on their costs and returns? This article is one of the early exercises to examine the impact on banks’ balance sheets in the Indian
Anil Ari, Sophia Chen, Lev Ratnovski
Across the globe, economies have been hit hard and fast by COVID-19 (IMF 2021). In the US, unemployment spiked in the first half of 2020 at an unprecedented speed. While such a shock is unlikely to leave banks unaffected, equity buffers have improved significantly since the 2007 financial crisis, and monetary and regulatory policy responses were swift and radical to strengthen the resilience of the financial system (Feyen et al. 2020). In addition, governments stepped in to support the real economy, which indirectly benefitted banks.
What has been the effect of the pandemic on banks’ health and their ability to support the economy with lending? In recent work, we explore if and how US banks’ health has been affected and if there have been changes in lending growth, including in reaction to government support programmes, and in loan conditionality (Beck and Keil 2021).