This report aims at addressing the covid-19 crisis more specifically, how it devastated Banking systems in India. Banks are an important part of the flow of money, anything affecting people's freedom to spend and invest money eventually affects banks. This article will look at what Covid -19 is and why it affected the economy as deeply as it did. Before looking at the effect of Covid-19 on the banking system in India the current article will also briefly cover the Banking systems in India and their importance in the country.

Due to banks being divided into different types they represent different types of revenue losses in the pandemic. This report will also discuss the condition of banks in India before the pandemic, to see the effect from the effect after. The pandemic affected banks in different ways, it affected people's ability to go to the bank, people's ability to make income and therefore deposit money in accounts, it affected government funding and support for those people living in struggling areas and more factors.

The report will further cover how the banking system was able to sustain itself, by using technology, getting government assistance and along with other methods aimed at decreasing the spread of the virus. To conclude the report, the current situation will be analyzed and how well the Banking systems are doing and the changes the banking systems went through after the pandemic will be discussed.

Introduction
On 31 December 2019, WHO (World Health Organization) was informed of cases of pneumonia of unknown cause in Wuhan City, China, within a few months Covid-19 rapidly began spreading across the world. The pneumonia was later recognized as Covid-19. On January 27 2020 the first case of Covid-19 was reported in India. This pandemic caused a great strain not only on people's health but the economy at large, as issues such as shortage of workers, lack of revenue and other equally devastating issues were raised from this pandemic.

This caused anxiety amongst the people as the cost of living was threatened, and the organization also had to limit operation to a minimum limiting production potential. India as a developing country was set back due to covid-19, leading to many government projects being put on hold.

Out of all establishments, the most affected were banks, this is due to the support banks systems offer to the economic model as a whole. Banks and the amount of revenue they hold determine the power and freedom a country has to perform certain projects, actions and other public responsibilities. Major industries in the Indian economy such as aviation, manufacturing and many other sectors need the involvement of people.

Besides organization people's concerns were no longer about purchasing or investing but rather the main focus was on well-being and health leaving the focus on other non-essential industries. The banking reforms taken by banks were mainly focused on stabilizing the economy and caused the banking sector a major loss.

Conceptualization

1. Central Bank- A national bank that operates to establish monetary and fiscal policy and to control the money supply and interest rate.
    
2. Commercial Banks- A bank organized chiefly to handle the everyday financial transactions of a business (as through demand deposit accounts and short-term commercial loans)
3. Repo Rate- The interest paid by banks to the RBI for money it borrows from it.
    
4. Reverse Repo Rate- The interest that the RBI pays commercial banks for keeping excess money with them.
    
5. Covid-19- a mild to severe respiratory illness that is caused by a coronavirus (Severe acute respiratory syndrome coronavirus 2 of the genus Beta coronavirus), is transmitted chiefly by contact with infectious material (such as respiratory droplets) or with objects or surfaces contaminated by the causative virus, and is characterized especially by fever, cough, and shortness of breath and may progress to pneumonia and respiratory failure.
    
6. Pandemic- occurring over a wide geographic area (such as multiple countries or continents) and typically affecting a significant proportion of the population.
    
7. Covid-19 [1]-As defined by WHO "(Covid-19) Coronavirus is an infectious disease caused by the stars-live virus". The symptoms of the virus are mild to moderate respiratory illness and over time people may recover. For more serious symptoms, a patient will require medical attention. Older citizens have a high risk of getting seriously ill due to Covid-19 due to threat this was mainly caused by the weakening of the body due to ageing.
    
8. Banking system and Covid-19-The reason Covid-19 is associated with banking systems is the effect it had. Due to disrupting development and economic functions in such a small space of time. This has greatly devastated India due to how India was already attempting to from its negatively growing GDP, the pandemic greatly hindered India's plans.

The Banking System in India and its importance
A banking system is a series of institutions that provide financial assistance for a certain span of area. India's banking system is made up of the central bank (RBI) which uses monetary policies to control money flow, development banks which offer financial assistance such as credit facilities for public interests (development finance institutions), and commercial banks, these are banks that perform procedures such as deposits and withdrawals of money for the general public, providing loans to the productive sector of the economy to get returns and other such related activities and other similar financial institutions.

Commercial Banks can be divided into three sectors of banking and they are the most important in India, the public banking sector (government-owned banks such as SBI), the Private sector of banking (privately owned by stakeholders ICIC bank), regional rural banking, these are institutions base in rural areas and their main purpose is to assist and gentrified such areas to speed up development and assist the local economy (These banks are usually branches of larger banks) and foreign sector of banking (banks that are owned by foreign investors with the bank's headquarters outside India such as Citi bank). These three types of banks help in giving financial assistance to all people coming from different backgrounds.

The banks are a vital key in India's financial sector and are made up of savers and investors, which provides banks with a constant cash flow that can be used to lend to people who are productive in the economy, making it grow even more. India's banking system is made up of mostly government-owned banks with a dominance of 60 per cent. To further elaborate on the importance of banks they help provide financial help to developing areas in India, this will help remove the status of India from being an emerging and developing country.

Analysis
A way to measure the prevalence of the Covid –19 is in a manner of waves; the first wave, second wave and third wave. This is a way the government kept labels on the virus as it spread, this is also a way of seeing how the banking sector was effective as the virus worsted and decreased.

1. In the first wave the virus had taken India by surprise although its presence was known, a few individuals were infected and a lockdown was initiated. This caused smaller institutions to suffer financially the effect on the banking system was not enough to cause worry, the government focused on getting medical equipment and supplies to those who already had the virus. Around this time the set-up to fight the virus was temporary and its effect was not expected to last long. When the virus began to worsen the second wave began.
    
2. The second wave saw many people enter hospitals and other medical facilities the segment of people was younger than the last in the first wave. This meant the working class and potential citizens who are supposed to be working and helping the money flow to the banks were hindered. The government made policies that made it easier for banks to lend out money and the government itself started funding and providing people with treatment. The third wave made it apparent that this virus was going to be a long-term situation that needed more permanent reforms to conquer. This is when the government invested in ways to help people sustain themselves during the pandemic and the population at large experiencing lockdown learnt to go about their day in their homes or at work following strict rules.
    
3. The third wave was when the virus was being contained and several cases slowly subsided, this allowed for the reopening of different sectors depending on the risk. Travel was allowed for a certain time and cancelled if the number of coronae grew. More people recovered from the virus and with the introduction of the vaccine many survived the virus. This untimely led to the government having to fact a large amount of credit and work on restoring all the funds it had spent battling the virus.

A good way to analyze the effect the pandemic had on India's banking is by looking at the GDP (Gross Domestic Profit) GDP measures the output of goods and services in India compared to India's GDP during the pandemic went down by a staggering 7.3% which is the worsted performance India has ever had since its independence, a survey conducted by the Centre for Monitoring India's Economy shows a steep rise in unemployment rules, in the range of 7% to 12%[2].

This was mainly due to the impact felt from the hospitality sectors of the economy such as restaurants, tourism which makes up 7% of India's total GDP and aviation and other sectors that may put individuals at risk of contracting Covid-19. With a large part of the tourism sector affected by the pandemic, this caused a decline in the amount of money that was present in those sectors. Where the banking system and the GDP are linked is how the banking sector plays a major role in sustaining the GDP.

Banking systems are often referred to as the backbone of GDP growth, banks offer out loans to the general public and attract investors which helps lift responsibilities away from the government. This gives people the opportunity to improve their standard of living, promotes industrial growth and helps create employment.

This helps reduce rising prices, unbalanced development and other issues the government may face. The presence of the pandemic disabled many a large part of the benefits banking systems offers to the GDP. GDP is a percentage of 7.3%, and a decrease in banking input would greatly affect the GDP.

Banks during the pandemic played an important part, the government had to assist banks to help them avoid risks that may result in a major loss. The government issued and removed policies that may remove the flexibility banks had to provide money to the people and businesses and set policies to ensure that banks were not affected by the virus due to the handling of money being on major way Covid-19 can be passed.

Government-assisted banks by expanding their lending capacity, this can be done through losing policies that limit capital raising and encouraging banks to raise capital. Banks also lifted restrictions that prevented banks from lending out a certain amount of money.

Usually, the government will give penalties to banks for exceeding certain limits of money lending, to ensure that the risk of lending was more secure the government offered to cover the risk for the productive sector such as SMEs and supporting funds that cover the general public should they miss a payment. RBI cut the amount of CRR required from banks, proving relief during the pandemic.

Marginal standing facilities were also made easily available for banks, it is often referred to as overnight lending which e of digital transactions banks had to restructure in how customers interact with the banks. Through changing restrictions and expanding lending capacity the financial structure of the entire banking system was changed.

Current Banking Scenario

Today newly mutated forms of corona such as omicron threaten to potentially cause a global panic. However, this is not likely due to how aware people are of the virus and how the present state of living has adapted to the impact the pandemic had. They are many measures that the government has done to protect the banking sector from being hindered by a potential threat.

The RBI has chosen not to change the repo rate and reverse rate from the rate it was at since the pandemic, the fear that the effect of corona and the imminent omicron may have the same effect as the last rates during a covid-19 pandemic will help inject wealth in the economy.

The use of digital banking is being wildly used more and more often. This makes leaders and individuals look at the future of money, and how it has changed. Digital decentralized systems such as bitcoin have arisen as a threat to traditional banking, and ideas of India having its cryptocurrency have even been thought of. The pandemic propelled the future of banking forward making banks think of new ways to secure and issue money.

Recent events and cases have made the Indian government reopen tourism and other sectors that were closed during the pandemic such as aviation. This has helped India due to tourism being a major market in India, this also shows how people have slowly learnt to live and prevent the virus from spreading. The restoration of establishments has helped provide jobs and help the economy recover from the setback that corona had caused.

The government has been discussing issues related to the future of money such as cryptocurrency; this had made the government aware of such issues which ensures a development that may make banking and transaction easier. Discouraging cryptocurrencies will increase the amount people spend on the development of the country, where cryptocurrency is decentralized from the government banking proving no benefit to India.

How banks have combated the effects?

[3]Since Covid-19 digital transfers have been blossoming in India which has introduced more than half of the population to the digital world. Besides digital technology reducing covid-19, it has made money more efficient to handle and secure. The introduction of digital technology also raises the potential for many possibly as talks on the banning of cryptocurrency to arise, to the government owning its cryptocurrency. Covid-19 has pushed banks to think of more ways it can help improve them and has greatly pushed the development of technology in the banking systems.

The need for digitalization is needed although the number of people using digital platforms has increased large number of people and traditional banks are not able to fully use digital banking. A few challenges that traditional banks face are skills to help manage digital banking can be costly, the threat of cyber-attacks and the infrastructure for setting up systems. All these points need money and time to assess and due to the pandemic still being present the development of traditional banks will continue to be slow.

The RBI has planned methods to try to support the 100% digitalization of banks, such as lending out money for the cause. In addition, the RBI has adopted AI and semantic computing in dissolving problems that would have required, a large body of people this technology will be connected to other banks that will all be digitally linked to RBI. Although expensive to set up digitalized banking systems that can help in strengthening the banking system in India.

Observations with Recommendations
Based on the current report banking was an important piece in making sure the effects of the pandemic were not going to heavily affect people. Due to most banks being government owned the use of banks happened more effectively. A way the RBI can further develop the zinnia banking system is by using systems similar to that of cryptocurrency to try and build a more effective digital network, rather than completely criticizing cryptocurrency.

This is mostly due to the 100 million people invested in cryptocurrency with an approximant amount of 10 billion dollars, that could be redirected to circulation the money in the economy. To avoid an incident similar to this the RBI need to develop strategies or special funds that will cater to the global pandemic and situations of such a nature.

Conclusion
To conclude this informative report, Covid-19 affected banks, physically through digitalization, systematically by getting the government's backing. This helped neutralize the threat and potential damage it was supposed to have. This was more than a health concern, it was an economic one too, one that tested all financial institutions and their ability to assist the people. Covid-19 affected the banking systems in numerous ways.

As people began to feel the effect of the pandemic banks had to take responsibility to make sure people were financially stable. The government lifted policies and covered loans for small businesses due to them being productive the government did many other things such as adjusting repo rates and reverse repo rates to assist banks in the pandemic.

All these actions helped stabilize the economy or help maintain it, in a way banks were a key role in making sure that the pandemic would not affect the rates and other figures would not go up, improving the standard of living.

Due to the pandemic continuing, but under less restriction, a full conclusion cannot be drawn up. Banks have taken a lot of responsibility; the effect of the bank's assistance is still going to see for example the loans that banks gave will result in a lot of people who will have to pay back loans made to the bank, which may end up resulting in debt.

The current situation is the result of stagnation from the pandemic, due to the little economic activity leaving banks giving out more money than is being used, which then leads to inflation. A combination of the two has put the government in a position to focus on recovering economic stability, which can explain why most industries are functioning although covid-19 is still present.

References:

1. Monit Khanna Updated on Nov 15, 2021, Technology, https://www.indiatimes.com/technology/news/india-internet-usage-report-554181.html
2. Bipasha Barua & Suborna Barua,30 November 2020, Springer https://link.springer.com/article/10.1007/s43546-020-00013-w
3. Deloitte https://www2.deloitte.com/in/en/pages/financial-services/articles/weathering-the-covid19.html
4. Shreyansh Mangla, timesofIndiahttps://timesofindia.indiatimes.com/readersblog/shreyansh-mangla/impact-of-covid-19-on-indian-economy-2-35042/

End-Notes:

1. Coronavirus disease WHO. https://www.who.int/health-topics/coronavirus#tab=tab_1
2. Krishna Athal "Young unemployment in India post-Covid 19", The time of India. https://timesofindia.indiatimes.com/blogs/krishna-athal/youth-unemployment-in-india-post-covid-19/(acessed, 25 May 2022).
3. Covid-19: Impact on banking sector KPMG. https://home.kpmg/xx/en/home/insights/2020/07/covid-19-impact-on-banking-m-and-a-2020.html

Written By:

1. Ngcebo Sizwe Mamba, B.B.A.LL.B. &
2. Dr. Snigdha Sarkar, Assistant Professor KIIT School of Law, Bhubaneswar, India