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Home > Top Stories > How Banks, Financial Institutions Are Surviving Pandemic Tsunami

How Banks, Financial Institutions Are Surviving Pandemic Tsunami

Published by linker 5

Posted on November 18, 2020

4 min read

Last updated: January 21, 2026

Illustration of banks navigating challenges during the pandemic - Global Banking & Finance Review — This image represents the struggles faced by banks and financial institutions during the pandemic, highlighting credit risk and operational hurdles as discussed in the article.

By Kunal Sawhney, CEO, Kalkine.

The banking and financial services industry is one of the sectors among many that has been reeling under the various constraints due to the pandemic. A dramatic drop in the credit offtake, relatively lower demand for various credit facilities along with the deferred repayments from the customers on their existing debt obligations are some of the fundamental challenges that have affected the banker’s ability to sustain a steady topline, as well as the net profit attributable to the shareholders.

In the beginning of the pandemic, the central banks of almost all the countries have brought the key lending rates near historic lows, so that the partner commercial banks and other international arms of foreign banks can offer cheaper means of credit to the organisations and individual borrowers.

Hurdles in operations

London-based research and auditing firm Deloitte had said that the uncertainty arising out of the coronavirus pandemic is likely to remain for the foreseeable future. While, on the other hand, PricewaterhouseCoopers (PwC), the London-headquartered accounting and consulting giant, has highlighted the major challenges that are going to arise in the near term.

According to PWC, there is a huge possibility of a global recession, reduction in productivity in the workplace, reduction in consumption due to decreased consumer confidence and effects on results of operations are some of the key challenges ahead.

The credit risk emerging from the existing retail clientele and the corporate borrowers had gone up due to the global health emergency.

Banks and financial institutions have been on the front line of the nearly freezed credit cycle due to the challenges of Covid-19 and restrictions put by the governments during the lockdowns. Be it a central bank operating under the umbrella of the government or a small-sized financier or a financial institution offering customised credit facilities to limited sectors; all have been facing hardships and uncertainty.

A Netherlands-headquartered accounting and consulting firm KPMG report has underlined the instability and heightened volatility prevailing amid the global capital markets due to Covid-19 uncertainties. The full impact on the markets hasn’t been determined as of now, but the adverse impacts are likely to continue from the knock-on effects of coronavirus, the report has highlighted.

It has further stated that the low interest rate regime being followed in most of the developed and developing countries have reduced the core profitability among the banks in most mature markets. Following the reduced proportion of operational gains, the financial institutions are gradually shifting their focus towards commission-based income with technology-enabled businesses as their key focus.

The response

Following the disruption in the global financial markets, almost all banking groups have taken a series of calculative steps that can reduce the burden of regular expenses, thereby increasing the proportion of operational gains.

A major rejig on an organisational level including a reduction in staff size, downsizing the number of actively operating branches, incorporation of AI-enabled systems, wherever possible to lessen the dependency on manpower, bringing in highly customised credit facilities with easier repayment terms and tapping on the existing customers to acquire more meaningful clients.

The World Bank had announced a whopping sum of nearly $160 billion for its Covid-19 response meant to be extended to the poorest countries with weaker banking and financial services facilities. The World Bank commitments have already touched $59 billion in FY20 that is equal to the sum realised in the FY10 during the time of subprime mortgage-led global financial crisis.

The UK administration has come up with the fresh structure of Coronavirus Business Interruption Loans under which the government has proposed to extend especially customised credit lines to safeguard the businesses affected due to the pandemic. Under the scheme, a loan starting from £30,000 can be availed up to an upper ceiling of £5 million.

With the extension of credit lines to maximise asset base, there can be instances with the banking systems in which the proportion of credit offered to clients with a weaker credit profile and to micro small and medium enterprises can increase the proportion of subprime borrowers in the apparently healthy loan books of the lenders. The meteoric surge in the MSME clientele and other subprime borrowers possess increased risk of an upsurge in the non-performing assets in the books.