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The country’s largest lender, the State Bank of India, said Saturday that it would be very difficult to assess the medium or long-term impact on the banking sector right now in the wake of the ongoing national blockade, as this will continue to evolve across countries. emerging. situation.
The bank is looking at the short term now, the next two to three quarters, said a senior OSE official on condition of anonymity.
He noted that the impact of the blockade over the next one to two years will be difficult to assess at this time.
“In the next one or two years, we will have to navigate very carefully and SBI is sure of a change as India is a young country and a growing economy,” said the lender’s senior official.
He said the bank was the first to respond by providing working capital as an “emergency 10 percent COVID line of credit.”
This was extended to all clients with “standard assets,” he said, adding that other banks then followed suit.
Regarding the three-month moratorium on loan repayments, announced by the Reserve Bank of India in the wake of the coronavirus outbreak, he said, nearly 20-25 percent of SBI’s corporate borrowers had taken advantage of it. .
“Making use of the moratorium has an inherent interest cost,” said the official.
He said that the RBI’s LTRO (Long Term Repo Operations) facility to banks has also helped raise liquidity.
“SBI took about 20-25 percent of this liquidity facility provided by RBI,” he said.
The bank is reaching out to clients with impaired cash flow so they can get more help, he said.
According to an analysis, the aviation, hospitality, travel and tourism sectors were the hardest hit in the wake of the coronavirus outbreak, he said, adding that energy and steel were also negatively affected as demand fell.
The sectors that could benefit from the pandemic are the pharmaceutical industry and the manufacture of medical equipment, the official said.
According to him, banks have been allowed to reevaluate companies’ working capital limits, should they be affected by the COVID-19 crisis.
Normally, reevaluation of working capital is equivalent to restructuring and should be shown as non-productive assets, he said.
The OSE official also said that the Association of Banks of India (IBA) is also evaluating measures, which can be taken by banks in this situation, and weighing the additional support that can be obtained from the regulator.
India could take advantage of the COVID-19 outbreak as several companies abroad have shown interest in moving their base to the country, he said.
For exporters, he said, charges and fees had already been reduced before the current crisis, and the bank is willing to analyze liquidity and other supports that can be provided, whenever necessary.
