From loan moratorium to digitisation, 2020 saw major shifts in banking

While lenders create a hype around the services offered on digital platforms, customers think otherwise, given that frustration due to the quality of service has only increased, over the years.

Calendar year 2020 will be remembered for the major shifts caused by the pandemic that led to the Reserve Bank of India’s urgent steps to ensure financial stability.

The year also saw the failure of large financial institutions.

The central bank allowed a moratorium (payment holiday) on dues for six months, while raising the insurance cover for bank deposits 5x.

Besides, the use of digital channels for banking saw a sharp rise.

While lenders create a hype around the services offered on digital platforms, customers think otherwise, given that frustration due to the quality of service has only increased, over the years.

Complaints on ATM/debit card usage, as well as mobile and e-banking, top the chart.

Growth gathers steam for NBFCs in H1FY21

The growth momentum seems to be back for finance companies.

Their balance sheets expanded at 12.1 per cent (year-on-year basis) till September 2020 (H1FY21), up from 8.9 per cent for 2019-20 (FY20). In 2018-19, it had clocked 20.6 per cent growth.

The year 2019-20 marked a significant moderation in NBFCs’ financial performance, after double-digit balance sheet growth in the previous three years, according to a report on Trends and Progress in Banking in India.

The Reserve Bank of India publishes this report annually.

A challenging macroeconomic environment, weak demand compounded by risk aversion, liquidity stress and rising borrowing costs in the wake of the IL&FS default resulted in a substantial deceleration in asset growth in 2019-20.

The impact was particularly pronounced for non-deposit taking systematically important finance firms.

On the other hand, deposit taking NBFCs weathered this difficult period and continued to grow at a healthy pace.

In view of the pandemic, and also in order as well as to maintain adequate liquidity, NBFCs increased their cash and bank balances significantly during the year, the RBI report said.

The NBFC sector’s asset quality deteriorated as slippages rose in 2019-20.

However, efforts were made by these companies to clean up their balance sheets, as reflected in their written-off and recovery ratios.

The net non-performing asset (net NPAs) ratio remained stable and the provision coverage ratio (PCR) improved in the period under consideration.

In 2020-21 (up to September), impairment in asset quality intensified.

The bad loans in per cent term moved up from around six per cent in March 19 to 6.5 per cent in March 2020 and further inched up to 6.7 per cent by end of September 2020.

Photograph: PTI Photo

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