In brief

In brief

  • Helping Indian banks outpace change amid the COVID-19 crisis and create a promising future.
  • Banks are in the eye of the COVID-19 storm, helping customers stay afloat even as they struggle to maintain their own service continuity.
  • Four keys focus areas: credit management, revenue compression, customer service & advice, operating model adjustments & cost control.
  • Banks must keep one eye on the future and design interventions and initiatives with long term value.

Indian banks are solving for the COVID-19 crisis

Helping Indian banks respond effectively to the immediate impacts of the COVID-19 crisis while creating a promising future.

When COVID-19 struck, governments globally jumped into action and issued lockdown measures. Their priority? To save lives. But on finding itself staring at another huge challenge that could cripple the economy—a debt crisis—the Indian government quickly broadened its focus to saving both lives and livelihoods.

This put banks in the eye of the COVID-19 storm. With the crisis continuing to unfold, it’s time for retail and commercial banks to carefully assess the likely impact of the pandemic on their customers, their people and their businesses. Developing a set of effective strategies to outmaneuver uncertainty will help them significantly moderate the potential economic damage and play a positive role in the economy and society.

Helping Indian banks outspace change amid the COVID-19 crisis and create a promising future.

The unavoidable impact

Given that the crisis is unlikely to abate completely in the near future, banks should prepare for losses as well as for operating in the new reality. Regardless of how effective government and bank-sponsored credit modification and forbearance programs prove to be, the number of non-performing loans (NPLs) will undoubtedly rise in both the retail and commercial banking businesses. As a result, banks have got to consider the impact of the situation on four key areas of retail and commercial banking:

  • Credit management: NPLs will surge as consumers and businesses are unable to make loan payments.
  • Revenue compression: Rate cuts as well as a collapse in demand will impact banks’ top line.
  • Customer service and advice: Restrictions on personal interactions will push customers toward digital channels for service and sales.
  • Operating model adjustments and cost control: Misaligned revenues and costs will require banks to improve operational flexibility and rethink short-term priorities.

As loan loss charges increase and revenues decline, banks’ profitability will take a hit, which will further weaken capitalization. Banks’ valuation multiples fell more than 35% within a month of the first lockdown. The banks that lost the most during this period were Axis Bank, Canara Bank and Bank of India (see Figure 1).

Top 10 Indian banks by asset size

Top 10 Indian banks by asset size

Source: S&P Capital IQ.


Stock market volatility caused by COVID-19 posed another challenge—panic withdrawals of deposits by private sector banking customers. Not surprisingly, banks are facing credit rating downgrades due to weak asset quality outlook.


1.9% increase in NLPs and 130bps increase in credit cost in 2020.


Downgraded the outlook for Indian banking sector to "Negative" from "Stable".


Downgraded operating environment score for Indian banks to "BB" from "BB+".

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Four steps to managing the change

To help banks emerge stronger from these "never normal" times, we drew up a checklist of the four fronts they should focus on and the initiatives they should consider rolling out:

  1. Customer delight
    • In the era of social distancing and limited physical interactions, rethink the channels you are using to connect with customers. Offer hyper-personalized banking, tailor your interactions, and focus on what really matters to each customer.
  2. SME support
    • To meet their obligations, small businesses need liquidity and new products specially developed to help them address their challenges. Use data and analytics to accurately identify those that can be assisted and to craft relevant solutions. Also, take steps to prevent the credit risk from worsening and optimize operational banking by, for example, increasing credit limits.
  3. Elastic workforce
    • Empower employees to work and collaborate effectively from anywhere by implementing virtual desktop solutions and collaboration tools. Maximize remote-learning capabilities to ensure your people gain the new skills they need to face new challenges. At the same time, take a truly human approach to supporting the physical and psychological health of your workforce.
  4. New "smart" IT
    • Build the competencies to be more digital, data-driven and in the cloud. Focus on more variable cost structures, agile operations and automation. Create stronger capabilities in security so you can help your customers, people and systems thwart cyberattacks. Leverage ecosystem partners to shift to an asset-light model and choose new partners who are resilient to global risks.

Taking the bull by the horns

As banks take stock of the situation, they must solve issues with one eye on the future. The industry needs to design interventions and initiatives with long-term value. With many consumers doubting that banks have their best interests at heart, this is the time for banks to show that they understand their customers' plight and are committed to supporting them through the crisis. Building stronger, enduring, trust-based relationships with customers will greatly benefit banks in the long run.

Disclaimer: This article has been published for information and illustrative purposes only and is not intended to serve as advice of any nature whatsoever. The information contained and the references made in this article is in good faith and neither Accenture nor any its directors, agents or employees give any warranty of accuracy (whether expressed or implied), nor accepts any liability as a result of reliance upon the content including (but not limited) information, advice, statement or opinion contained in this article. This article also contains certain information available in public domain, created and maintained by private and public organizations. Accenture does not control or guarantee the accuracy, relevance, timelines or completeness of such information. Accenture does not warrant or solicit any kind of act or omission based on this article. The article is the property of Accenture and its affiliates and Accenture be the holder of the copyright or any intellectual property over the article. No part of this article may be reproduced in any manner without the written permission of Accenture. Opinions expressed herein are subject to change without notice.

Sonali Kulkarni

Managing Director - Financial Services, Accenture India


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