Banks and financial institutions have been unable to expand their business as the interest rate on loans have increased while economic activities have not significantly swelled. Returns had decreased exponentially. We were hopeful of an economic dispersion due to the prevalence of a two-thirds majority government, and hopefully, political stability. However, the world was taken aback by the sudden outbreak of the novel coronavirus. Due to the lockdown, all economic activities have come to a halt, and banks and financial institutions have not remained untouched by the crisis.

By looking at the latest quarterly report, we can see that banks and financial institutions have been pushed towards a grave situation. They have been forced to manage their losses with provisions. In the coming days, the government will have to find a focal point between public health, pandemic control and economic activities. Staying in a constant state of lockdown can lead to famine, and people will start dying not from diseases but due to the unavailability of food. In order to kick-start the economy, citizens should receive cash or other means of relief.

Biggest challenge

Currently, kick-starting the economy is the biggest challenge. If the government invests properly, the economy will be rejuvenated and livelihoods will carry on as well. By observing the world economy, the government should increase product consumption. On the one hand, the lockdown was pushing people towards unemployment. On the other, food and produce being brought to stores were rotting away.

The lockdown is not just a problem, it can also be taken as a possibility. We have fallen behind in many sectors, especially in terms of infrastructure and transportation. If the government invests in such sectors, it will create job opportunities and develop our infrastructure as well. Investment in agriculture, medicine, education and health will improve people’s livelihoods. While much of public debate, until recently, has been on the effect of the lockdown, we are not sure how we are going to move ahead with regard to treatment should the people start to become sick. How many ventilators do we have? It is essential that we work towards outlining how we are going to establish good health centres and develop infrastructure to support it. This will not only increase local health quality but also bring down expenditure.

There is a misconception about banks and financial institutions among the general public as well as various policymakers. Currently, the government and industry have been saying that banks have been accumulating large profits and that they should be curbed and managed. It is important to understand that banks and financial institutions are also companies. The concept of profit and loss is defined according to the business.

Banks have been accumulating huge deposits and providing loans accordingly. They have been operating millions of rupees worth of people’s deposits and shareholders’ capital. Every bank has an average capital of Rs12-13 billion. This also needs to be returned. Banks have the responsibility of keeping the money safe and, as per the people’s request, give it back to them with interest. Considering the interest and other expenditures, it is important to understand that banks have only a small profit margin.

Many businesses believe that the problem will be solved by decreasing the interest rate, however, that is not a valid argument. Everyone has been affected by the crisis, but it is not acceptable to give equal relief to everyone. Every business should be studied and relevant techniques of relief should be outlined. The government should focus on how it can improve infrastructure and decrease the expenditure of banks by taking foreign loans. Banks arguing about not getting discounts and businesses arguing about not getting favours is ruining the environment, and this is a completely disruptive mindset.

Nepal Rastra Bank has ordered banks to reduce the interest on business loans by a flat 2 percent. It is necessary to study what sort of effect Covid-19 has had on businesses. How can banks give a 2 percent discount if their cost of funds has not decreased? The virus has not affected every person in a similar fashion. It is necessary to study the businesses’ balance sheets and provide relief accordingly. The government has declared a 2 percent discount, but will that be sufficient for every business? The government should provide relief according to the nature of the problem.

How can we come out of such a problematic situation? Every day, new situations keep arising. The government should change and activate its plans according to the situation of the world economy. Our plans will certainly fail if we move in a communal manner, therefore, a situational resolution is necessary.

Prioritise technology

According to the quarterly reports, banks have shown reduced income; yet expenses remain the same. It is apparent that banks have to move with the times and prioritise technology. The governing body has ordered banks to open many counters and develop infrastructure accordingly. Internalising new and emerging technology can help protect banks. Mobile and tablet banking can be used to provide in-home services. This can result in minimising the cost and amount of manpower being utilised. In the coming days, banks have to prioritise technological advancements instead of old practices, and the governing body should make it legally acceptable.

Currently, it is important for us to develop a dynamic relief package rather than a concrete package. Bringing in one type of relief package for all may not be useful. The relief package must be relevant, and the government should not be stingy whilst bringing it. Businesses have been running at high risk. However, the revenue being generated by them is being utilised for infrastructural development and national operations. Yet there are no concrete measures to address business concerns. The government should consider its relief towards businesses not as a relief but as an investment. If the government is able to invest in time and rejuvenate day-to-day activities, revenue will start increasing, and it will pave the way for infrastructural development.

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