If the pandemic goes on till 2021-end, then it’s a matter of worry, says veteran banker Arundhati Bhattacharya

“People cannot hold on for that long. While they can manage for a 5-6 month period, the restructuring can work and again people will get additional time in order to pay off the interest and the principle, I think that is something that is still doable, but in order to believe that we can manage a 2-year hiatus in regular normal activity, that is going to take a tremendous toll,” she said.

Bhattacharya advised caution even as the stock market is displaying some confidence.

“If you look at the stock markets, they are running way ahead. So, they are quite confident that things will happen and somehow stock markets though they have a tendency of getting into bubble territory, they are an early indicator. I have also found that they sort of gauge sentiments and they gauge activity a little better than maybe just the bankers and therefore I take heart from the fact that there is a lot of confidence in that and therefore a lot of confidence in the economy,” she said.

Talking about banks’ activity during the pandemic, she said, “Within the BFSI space, we must understand that it is like the medical system, it is like the health system, they don’t stop working. In fact through this entire pandemic, while very little has been mentioned about bankers, but banks have actually remained open throughout. So to that extent, this is an industry that remains open no matter what and because it remains open, there will be a certain percentage of it that will be hit, but overall generally banks are continuing to work.”

She further added that the NPA cycle will be going up and it must be ensured that banks can raise capital.

“I don’t think there is any big structural issue regarding the banks. However, given that, the fact that this time the NPA cycle will be going up, we have to see how best we can ensure that these banks are such that they can raise capital, that they can have enough order to ensure their stability. There I think in respect of the BFSI sector what we really need to see are the reforms that we have been talking of for a very long time. Those reforms, digitization, increased use of technology to do underwriting, to do risk management, these are the measures that will bring back the confidence into the BFSI sector,” she said.

On whether businesses can have a purely digital business model without a physical presence, Bhattacharya said, “I will use Mukesh Ambani’s term where he says that he wants to have a ‘phygital model’. I think that is precisely right, you need to have the physical presence, but much of the activity will become do it yourself (DIY) and much of it will move into the digital play. Why you need the brick and mortar is because there are times when the banks will still need confidence—I think there are two areas where the human touch is very important, one is the health and the other is money. I do not think people want to put all of their wealth into companies that have no physical presence at all. So you can’t get to them when there is a problem, you can’t even contact centers, and you can’t get the line because you are put on hold forever. In a crisis, in a problem, people want that physical place to go to. But other than that, for regular activity, I think more and more people will move to digital.”