Loans worth over Rs 6.45 lakh crore were sanctioned by PSBs during March 1 – May 15 for 54.96 lakh accounts from MSME, Retail, Agriculture & Corporate sectors; A notable increase compared to the Rs 5.95 lakh crore sanctioned as of May 8, the Finance Ministry said

Public Sector Banks sanctioned over Rs 1.03 lakh crore as emergency credit lines & working capital enhancements in the period March 20 to May 15, which is a substantial increase over the Rs 65,879 crore that had been sanctioned up to May 8.

It may be noted that with the lockdown coming into effect from March 25, state-owned banks had opened an additional line of credit of 10 per cent of the existing fund based on working capital limits, subject to a maximum of Rs 200 crore.

India has been under lockdown from March 25 to check the spread of coronavirus. The lockdown has been extended till May 31 with some relaxations.

Meanwhile In a communication to the States, Union Ministry of Home Affairs has noted that fear of COVID-19 infection and apprehension of loss of livelihood are the main driving factors for the movement of stranded workers towards their homes. In order to mitigate the distress of migrant workers, the communication stresses on a number of measures that may be taken by the State governments, pro-actively in coordination with the Centre.

These include Run more Buses, ensure their Smooth Transition across States and inter-State borders; Create en-route Rest Places with basic amenities for people on foot, till they are guided to bus/rail stations; Dispel rumours, give clarity on train/bus departures.

With the country fighting Covid-19 pandemic and under lockdown, availability of essentials like food and health services to the masses is crucial. While for the consumers it is important that their supplies are maintained; for farmers too, it is imperative that the value chain starting with them is up and running to market their produce even under restrictions.

Taking the initiative further in this context, Mother Dairy, a wholly owned subsidiary of National Dairy Development Board, contributed in stabilizing the dairy supply chain in Vidarbha and Marathwada Region amid Lockdown. Located in Civil Lines area of Nagpur city, Mother Dairy is extending all possible support to farmers and procuring an average milk volume of 2.55 lakh litres per day in Vidarbha and Marathwada region

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It said Banks’ asset quality will deteriorate across the corporate, small and medium enterprises and retail segments, leading to pressure on profitability and capital.

“We have changed the outlook for the Indian banking system to negative from stable. Disruptions to economic activity from the coronavirus outbreak will exacerbate a slowdown in India’s economic growth,” Moody’s said.

Stating that asset quality will deteriorate, Moody’s said a sharp decline in economic activity and a rise in unemployment will lead to a deterioration of household and corporate finances, which in turn will result in increases in delinquencies.

Growing solvency stress among non-bank financial institutions will increase risks to banks’ asset quality because banks have large exposures to the sector,” it added.

It expects deteriorating profitability and loan growth to hurt capitalisation.

“Increases in loan loss charges and declines in revenue will hurt banks’ profitability, which will lead to a deterioration of capitalization. If the government makes more capital infusions into PSBs, as it has in the past few years, it will mitigate capital pressure for them,” it added.

It said while funding and liquidity at public sector banks (PSBs) will be stable, growing risk aversion in the system following a default by a private sector bank (Yes Bank) will increase funding and liquidity pressure on small private sector lenders.

“Disruptions from the coronavirus outbreak will exacerbate India’s economic slowdown. A deterioration of global economic conditions and a 21-day lockdown imposed by the Indian government in an effort to slow the spread of coronavirus will weigh on domestic demand and private investment,” Moody’s added.

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(a) Amalgamation of Oriental Bank of Commerce and United Bank of India into Punjab National Bank

(b) Amalgamation of Syndicate Bank into Canara Bank

(c) Amalgamation of Andhra Bank and Corporation Bank into Union Bank of India

(d) Amalgamation of Allahabad Bank into Indian Bank

The amalgamation would be effective from 1.4.2020 and would result in creation of seven large PSBs with scale and national reach with each amalgamated entity having a business of over Rupees Eight lakh crore. The Mega consolidation would help create banks with scale comparable to global banks and capable of competing effectively in India and globally. Greater scale and synergy through consolidation would lead to cost benefits which should enable the PSBs enhance their competitiveness and positively impact the Indian banking system.

In addition, consolidation would also provide impetus to amalgamated entities by increasing their ability to support larger ticket-size lending and have competitive operations by virtue of greater financial capacity. The adoption of best practices across amalgamating entities would enable the banks improve their cost efficiency and risk management, and also boost the goal of financial inclusion through wider reach.

Further, with the adoption of technologies across the amalgamating banks, access to a wider talent pool, and a larger database, PSBs would be in a position to gain competitive advantage by leveraging analytics in a rapidly digitalising banking landscape.

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