The coronavirus outbreak has brought together the world’s banks, as each of them struggles independently to tackle this unexpected and unprepared for turmoil in the financial sector. In a situation similar to the 2008 banking crisis, caused by the collapse of Lehman Brothers, banks are now looking for ways to reduce and consolidate their losses, while at the same time helping the economy bounce back.
How banks across the world are responding
In developed countries like the US & UK, the banks are working in tandem with the governments to provide assistance and prevent businesses from collapsing, thereby affecting the whole economy. UK has launched the Coronavirus Business Interruption Loans (CBIL) package in conjunction with banks to protect businesses and extend loans from £25,000 up to £5m.
The situation is the same in the US with governments and central banks providing much of the cash, while lenders are being asked to serve as the “transmission mechanism” to ensure support finds its way to the companies and consumers who need it most.
Mike Corbat, Chief Executive of Citigroup, says the US lender is in “daily contact” with the White House and regulators, “relaying information ... [on] what we’re seeing in the marketplace ... what’s under stress”
However not all banks are falling in line, with those based in the UK, being very tough on loan disbursements and asking borrowers for personal guarantees.
Back home in India
Indian banks have also been swift in responding to the potential impact of coronavirus on the banking sector and the economy. In recognition of the financial difficulties being faced by individuals and businesses, the RBI has requested banks to grant a moratorium on EMI payments for the next 3 months.
State-owned lenders, such as Indian Bank, Union Bank of India and Bank of Baroda have come together with other public sector banks and SBI, the country's largest lender to offer emergency credit lines to businesses affected by the pandemic. Indian Bank, Managing Director Padmaja Chunduru recently released a statement, saying “In these challenging times, the bank is committed to stand by its customers. Keeping in view the hardships faced by various sectors of the economy, we have launched products to take care of immediate liquidity requirements of businesses and retail customers".
During crises times, banks really have the capacity to be the saviours of economies. With the pandemic becoming a global crisis of huge magnitude, banks will need to take the initiative, and help their countries tide over this crisis, with easy disbursement of loans and access to credit lines at relatively easy terms.
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