BANKING SECTOR PERFORMANCE SPECIFICALLY RELATED TO INDIAN PUBLIC SECTOR BANKS BEFORE AND AFTER COVID

Abstract

Focusing on important financial metrics including profitability, asset quality, and capital adequacy, this study compares the pre- and post-COVID-19 performance of Indian PSBs. The research encompasses the years 2014–16 through 2016–17, encompassing both the time before the pandemic, when there were attempts to improve efficiency and resolve non-performing assets (NPAs), and the time after the pandemic, when there were unprecedented obstacles and regulatory interventions. In an effort to tackle the nonperforming asset (NPA) issue and enhance financial stability, the government had already instituted reforms such as bank mergers, recapitalization, and the Insolvency and Bankruptcy Code (IBC) prior to COVID-19. Asset quality and profitability did better over time as a result of these initiatives, although many financial institutions were still dealing with problems from the past. The financial industry faced additional difficulties in early 2020 because to the COVID-19 pandemic. Stressing up PSBs' already precarious financial positions, the pandemic-induced economic downturn led to a spike in nonperforming loans (NPAs), especially in industries including retail, real estate, and micro, small, and medium-sized enterprises (MSMEs). Nevertheless, emergency credit line guarantee schemes (ECLGS) and moratoria on loan repayments were opportune government initiatives that temporarily alleviated the situation for borrowers and banks alike. In the period following the pandemic, PSBs adapted to the new normal by placing a greater emphasis on online banking, minimizing expenses, and being careful with their loans. Capital adequacy ratios improved and gross nonperforming assets (NPAs) fell, demonstrating resilience in the industry. However, profitability was low since provisioning was higher and loan growth was slower. Continued reforms, technological adoption, and strategic management of credit risk will be crucial for the long-term survival of Indian PSBs, according to this report. Despite the COVID-19 crisis, these PSBs have demonstrated resilience.