Considerations for faster economic recovery - what banks, companies and regulators can do has been saved
Considerations for faster economic recovery - what banks, companies and regulators can do
India is under lockdown as a response to minimising the spread of Covid-19 and businesses (except those engaged in essential goods and services) have paused their operations. There are concerns that once business resumes the disruption caused due to this pandemic could lead to a systemic failure impacting companies and the banking system as a result of steep decline in asset quality, and a string of covenant breaches and defaults.
On a macro level, it would be advisable to provide a boost to the business environment through additional liquidity and policy impetus for priority sectors so as to help businesses and the economy recover soon.
This whitepaper discusses whether it is possible to isolate the effect of Covid-19 crisis on businesses and define actions which, if taken, can restrict or mitigate the impact on businesses by spreading it over a longer time horizon. This would include allowing the viable businesses, if required, to obtain additional financing and simplifying the restructuring process for other businesses to ensure that we do not end up in a situation of a systemic lockdown of the banking system.