Editorial: Banking on some leeway during COVID

And it also implies that for many, getting back to work and pre-lockdown income is still a while away. It is in the backdrop of such a claustrophobic milieu that the relaxations on transaction charges, offered by banks to its customers were revoked last week. Ordinary transactions such as withdrawal of cash from ATMs which were considered free from March 24, became chargeable once the limits were breached, in terms of the number of transactions conducted. Even more pinching was the fact that the charges levied on customers for non-maintenance of minimum balance were brought back.

The reason that most customers found these charges back-breaking was the fact that thousands have been rendered unemployed in the backdrop of COVID-19. And it wasn’t just loss of jobs per se. Many people have been retrenched, furloughed, or put on the bench indefinitely. And a lifestyle that many had gotten used to in the pre-pandemic era, with ample disposable income to boot, is simply impossible in the time of the coronavirus when people are thinking in terms of pinching every penny – especially owing to the fear of what lies in store for the next few months.

Many salaried personnel who had been laid off in the last few months, with zero credits to their salary accounts were flummoxed to find substantial sums being deducted for non-maintenance of the minimum balance, a cruel twist of fate if one considers that the existing balance in such accounts would have pretty much been a corpus of sorts that would have helped them tide over the crisis for a few weeks.

But the bigger question is – how much can the banking sector handhold citizens in times such as an emergency? The burden that the Indian banking business is currently reeling under was succinctly reported by former Chief Economic Advisor Arvind Subramanian. He recently said that senior bank officials estimated that India’s stock of NPAs could increase by over Rs 9 lakh crore. And that the nation would be staring at NPAs of Rs 18 lakh crore, which makes up for 18 per cent of current loans outstanding.

The figures mentioned above might at best be a conservative estimate. But its fallout will be far-reaching without a doubt – impacting every sphere of economic activity in the country. With reduced lending and higher interest rates, demand and consumption will remain muted. Stakeholders in banking have also put forth the argument that when most other service providers have offered no room for relaxation in terms of their offerings – whether its ISPs or mobile or DTH service providers or gas, electricity or any such utility for that matter, it seems unfair that the banking sector shoulders the burden of the whole society at large.

The new normal for the banking business post-COVID-19 has required it to think in terms of cost-cutting – specifically through branch rationalisation and large-scale digitisation programmes. And banks in India are mirroring western counterparts when it comes to evolving customer behaviour post pandemic. As per the recently released World Retail Banking Report, 57% consumers now prefer internet banking, as compared to 49% before COVID, and 55% prefer banking via mobile apps, up from 47% previously.

Even as such efficiencies become the order of the day, cash remains the lifeblood of the economy. And benefits accrued from optimisations should be passed on to the most vulnerable consumer groups. Put simply, banking must incorporate a bandwidth for empathy when it comes to business decisions that affect the lives of a billion.