A STUDY OF THE COVID-19 CRISIS AND INDIA’S NATIONALIZED BANKS

ABSTRACT

This shift in responsibilities for India’s nationalised banks is evident in the current crisis triggered by Covid-19. Publicly owned banking was ostensibly given the lead role, with the power to significantly expand lending thanks to central bank liquidity injections, the ability to issue emergency debt payment moratoria, and the authority to renegotiate debt for stressed enterprises on more favourable terms. However, this shift of responsibility for responding to the disease outbreak to banks occurred at a time when nationalised banks were already burdened with significant non-assets as a result of pressure to lend to large, wealth infrastructure projects whose commercial products proved unviable, resulting in defaults. Moreover, despite the government’s budgetary assistance to counteract the severe demand contraction brought on by the Covid-19 crisis and the lockup response to it, businesses seeking credit were still unable to make timely payments to creditors.

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