Banking in times of corona

By Prateek Roongta

The new decade has started on a turbulent note for humanity. The impact of Covid-19 has been unprecedented. While healthcare, airlines, hospitality, and retail experience the immediate effect, banking is no exception. Despite large scale digitalisation over the last decade, banks’ business models, largely rely on human interaction. Banks need to reorient their business models swiftly, and implement measures for employee safety and business continuity.

While banks in India have commenced a series of actions in response to Covid-19, such as establishing a central task force, curtailing travel, cancelling events, and reducing outbound sales force, given the pace at which the situation is evolving, this may not suffice. Here are a few suggestions:

Design “distance banking” model: Branches with low footfall, or near another, should be temporarily closed. Others may be kept open on alternate days or for shorter hours. “Distance banking” involves modifications to branch layout.

Keep employee safety and communication centrestage: Define and enforce policies restricting physical presence. Careful attention to basic hygiene with a deep cleaning of premises and availability of sanitisers is fundamental.

Focus on ‘smart’ working: Innovate and experiment to discover “new ways of working” and customer engagement. While demonetisation made digital currency ubiquitous, Covid-19 could make “Virtual RMs” a household feature. Ensuring a semblance of a regular working day with remote teams in the “new” working model is critical-discuss detailed schedules, weekly agendas and frequent reviews.

Plan for business continuity: Divide employees into “rosters” and assign workdays and hours. Ensure minimal office space overlap between “rosters” and plan for contact tracing, if required. Segregate offices and employees’ basis activity.

Reimagine credit policies: Pro-actively think of changes in credit policies, don’t react post-facto. These can include moratorium for repayments, increasing loan tenure, interest rate concessions, waiver on penal charges and interest for late payment. An absence of pre-agreed policies may result in a knee-jerk reaction.

Digital capabilities a “must-have”: Migrate customers to digital platforms. Simplify onboarding on internet and mobile banking apps, provide tutorials online or telephonically and enhance digital channels to fill any gaps. Spikes in the usage of digital channels will require scenario planning to ensure systems remain online despite high online traffic.

Lead with innovation: Offer innovative products relevant to customers in current context. Health insurance to cover Covid-19 related quarantine or hospitalisation, new loan products for self-employed and SMEs with low collateral and speedy processing.

Strengthen cyber-security: Banks should review their security infrastructure, taking into account the type of networks employees will access (public or private) and build systems for secure sign-in from remote locations to ensure endpoint security.

Maintain financial discipline: The looming recession and reducing consumer demand will necessitate banks to target cost efficiencies. This requires rigorous and prudent expense management processes, re-looking at non-critical capital expenditures and rationalising discretionary G&A expenses eg, marketing channels/expenses, training expenses etc.

Instead of reducing the workforce, banks should consider restructuring compensation to minimise the impact on profitability and defer hiring plans until the situation stabilises.

In these times, banks must focus on employee well-being and safety, while keeping the lights on to safeguard preparedness for recovery and rebound. A resilient and robust banking network will give our economy the much-needed vigour to overcome this crisis.

The author is Managing director and partner, Boston Consulting Group, India. Views are personal.