Covid-19 Impact, Challenges & New Opportunities For BFSI
Banking Frontiers|April 2020
COVID-19 outbreak came at a time when India’s economy was already slowing due to persistent financial sector weaknesses. Banking Frontiers carried out a 4 part-study on this topic and sought to understand (i) Impact on economy & business (ii) Challenges (iii) Strategies & initiatives adopted by the companies to compete with COVID-19 (iv)Adoption of digital products and services. The findings are narrated in 4 different articles:
Mehul Dani and Ravi

Part 1: COVID affects business & operations of financial companies

The pandemic has a major impact on the economy and business of the BFSI companies:

Banking and financial institutions were under immense pressure to ensure business-as-usual amidst the lockdown and health crisis. The operational and technical challenges for both the customers and employees highlighted a lacuna and the general lack of agility in our banking systems when faced with an emergency. In the current scenario, the key challenge for the companies is to balance employee’s health, safety and customer expectations.

IMPACT OF COV1D-19

The impact of the pandemic is felt across industry sectors. Banking is an essential service and Fino Payments Bank always maintained itself as a responsible banker. Shailesh Pandey, chief sales & distribution head at the bank, says in spite of the lockdown the bank’s teams on the field, branches, regional offices and corporate office are working in tandem to make services available seamlessly. “All the office staff, including finance and IT, are working from home adhering to the government directive,” he adds.

With business and economy coming to a standstill, thousands of migrants - mostly daily wage-earning workers have been rendered jobless. This has a large bearing on the domestic remittance business. Shailesh Pandey gives details about the dip in the bank’s remittance business: “We have seen a dip of up to 80% in our remittance business. However, we are seeing an uptick in early April. Our objective is to have all the 200,000 banking outlets open, and given the current situation at some places, we have to adhere to the local conditions and operate at 50% capacity.”

Canara HSBC Oriental Bank of Commerce Life Insurance Co has a pandemic response plan to that includes remote working for the employees, including the off-roll staff, to ensure that all critical services and back-end operations are fully operational. Siddharth Kaushik, chief risk officer at the company, maintains that the company has not seen any degradation in the service levels and all processes are operating at near normal. “Given we are in a lockdown situation and customers focus on social distancing, the same shall have an impact on the expected business in the coming days or months; however, as a company we are working on a technology backed sales strategy with digital footprints which shall help us overcome the challenges posed by the current situation ensuring business can still thrive while maintaining social distancing norms,” he adds.

The Municipal Cooperative Bank of Mumbai has opened all the 22 branches to fulfill the banking and financial needs of its customers. The maximum number of customers of the bank comprises the employees working in Sewage and Waste Management department of the Municipal Corporation of Greater Mumbai are they frequent visitors to the bank branches for their banking needs as they prefer having hard cash instead of using digital modes of banking in this kind of a situation.

Vinod Ravadka, CEO & general manager, says: “We have reduced our bank’s timings - it is now 11 am to 2.30 pm. We have certain challenges and tried to overcome those. All the branches are provided with sanitizers, masks, hand-gloves to protect the staff from getting infected.”

VARIOUS COMPLIANCES

Anything which has an impact on the economy will have an impact on the general insurance industry. Even before COVID-19, the slowdown had impacted the industry. For Bajaj Allianz General Insurance Co, business revenue has not been impacted much by the lockdown, as s business does not come from one segment of the economy. The impact is not the same in every segment of the business and there is still demand for health and home insurance. People purchase health insurance policies irrespective of the economic condition prevailing in the country and general insurance companies are receiving good business from health covers.

Rajeev Kumar, chief risk officer at the company, says there is rise in people getting individual health insurance cover after COVID-19. The epidemic has an impact on the company’s new business for motor insurance as there are no vehicles on the road due to the lockdown, he says, adding people are, however, renewing their motor insurance policies. “It is not necessary that only vehicle moving on the road will meet an accident. Even stationary vehicles can be involved - for example if the vehicle catches fire due to an electric short-circuit or some tree falls on the vehicle, etc,” says he.

SBI General Insurance Co is facing challenges like stress on liquidity due to increase in claims and lower new business volumes, decrease in return on investments due to adverse market movements, decrease in liquidity and higher asset-liability management risks. The company is also battling with business continuity plan challenge.

Says Amar Joshi, the company’s chief business officer: “There are many expectations from us and fulfilling those mandates for our employees, customers, distributors, intermediaries, vendors and society at large in times like these is the foremost challenge for us. On the workspace front, getting people to accept that work from home is the new normal is a challenge. Shift from conventional workplaces to the virtual one needs to happen seamlessly without any impact on core operations or customer service levels. This is a unique and unprecedented situation and we need to adjust to the evolving situation and respond to changes accordingly.”

For Reliance Capital, COVID-19 has restricted the way it conducts its business. There is obviously an economic impact. Swaminathan Subramanian, chief people officer, says the company has taken several proactive measures even before the lockdown was implemented but he is concerned because the impact is uncertain, and there is no certainty about the pandemic’s exit. “However, there will be more focus on health and wellbeing among the people after this epidemic,” he says.

“It is not a holiday,” he says, and hence “work ethics need to be followed. We have Oracle Cloud HR system, which allows any form of HR activity like attendance, employees leave, etc done remotely. Because of the processes that the system follows, it has become easy for us to record attendance when the employees work from home. It is a performance management period for us and hence employee appraisals will be done online by April end.”

LONG & SHORT-TERM IMPACTS

Financial services companies have had long-terms and short-term impacts because of the pandemic. However, business is usual for the SBI General Insurance Co. HR is ensuring new ways of working from home to keep teams more intact and engaged. Amar Joshi concedes that the prevailing situation certainly limits the scope of new business generation, but the company’s strong relationship quotient with its intermediaries has enabled it to leverage its strength of personal touch, enthusiasm and positive energy in converting it into incremental renewal achievements and customer connect.

Fino Payments Bank is facing the prospect of decreasing business. Shailesh Pandey says the company has ensured that costs are managed well to keep business afloat. “Innovation will be the key across departments and processes. As such marketing and HR spends will be rationalized on need basis to support the business. We have long standing relationships with our partners for advertising, analytics and technology and in this critical juncture we stand by each other,” says he.

Canara HSBC Oriental Bank of Commerce Life Insurance Co has enabled all critical processes, both internal and external, to operate digitally. The company is leveraging digital platforms to implement marketing and sales strategy to connect with its existing and potential customers. Siddharth Kaushik says long term impact is something which remains uncertain. “Looking at how the situation has evolved, we shall continue to focus on digitally enabling our business operations ensuring that the impact remains minimal and we are able to adapt to the evolving scenarios.”

NBFC BIZ AT STANDSTILL

NBFCs are not spared by the impact of the pandemic. It is a known fact that if this sector gets impacted, there will be significant fallout that can damage the economy. On the one side, collections are disappearing due to the moratorium. On the other side, banks are not forthcoming to meet the financial needs of the NBFCs.

Rakesh Kumar Bhutoria, CEO at Srei Infrastructure Finance Co, hopes there will be positive regulatory measures. “I feel the moratorium must be carried forward to the entire value chain. If the regulator focusses only on the banks and NBFCs are left out, then this sector will face a financial crisis of a very different order. Soon, there will be some announcement from the regulator about the proactive measures for the NBFCs, which will help in the stabilization of the sector,” says he.

At Aadhar Housing Finance, most of the customers facing activities have come to a standstill. Using digital platform, the employees are working from home to ensure customer service remains uninterrupted. Rishi Anand, chief business officer at the company, says the crisis has left the transactions with customers at a standstill. “This is affecting the dreams of thousands of our customers, who wish to buy their own homes with home loans, and this in turn has affected our business prospects too,” says he.

Inditrade Group of Companies, through its subsidiaries Inditrade Fincorp (a NBFC) and Inditrade Microfinance (NBFC-MFI), are lending to the poorer sections of the society. Apart from its own funds, the company avails/ borrows funds to carry out its activities. With all offices shut and all employees locked down at their respective homes, business has come to a standstill for the company leading to a significant loss of revenue and complete uncertainty regarding recovery of loans. The challenge now for the company is how to meet the fixed costs for an uncertain period of time without any corresponding revenue. The lockdown has completely stopped cash-flows and no physical collection can be made. In addition, the RBI has announced a moratorium on repayments of loans for 3 months and this means no collections at all.

Sudip Bandyopadhyay, group chairman of the company, points out that the company’s lenders are continuously pushing it for honouring various terms of respective agreements and make repayments. Meanwhile the RBI’s moratorium talks about bilateral negotiations between the borrower and lender for the purpose of moratorium. “Unfortunately, in our case the customer is retail and they simply cannot pay us, and we have no option but to grant them moratorium.”

Bandyopadhyay also points out that the company’s lenders are institutions and they are using all possible means of collection. “This is an unfortunate situation for us and we are struggling,” he adds.

BACK TO NORMAL?

There is uncertainty around when COVID19 will exit. Even after the lockdown is lifted, the economy will not bounce back soon. Most of the workforce have gone back to their home bases and it will take 6-9 months for getting things to be in place.

Part 2: Challenges & cultural changes

Financial companies are facing infrastructure, connectivity & work culture challenges:

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