Challenges of Banking Sectors due to the Covid-19.

1. Due to economic slowdown, quantitative & qualitative growth of banking and financial transactions are in the phase of declining;
2. Interest income of the bank will be declined by 2% as provided by the monetary policy;
3. A high degree of risk of bad loans from the business such as tourism, luxurious industries due to problem in debt collection;
4. There will be the problem of excess liquidity due to the contraction of a bank loan;
5. High technical and sanitary operating cost of increasing digital business or transactions to maintain physical business;
6. Risk of unauthorized transactions while conducting financial transaction from the home;
7. Since most of the operating expenses of the banks are of fixed nature, even if the banking business is reduced, operating expenses will be increased and that effect on the net profit of the bank; 8. Risk of rapid spread of covid-19, if somehow one active employee gets the infection of such dieses;

Solution for such challenges

1. Merger between commercial bank should be promoted in order to reduce operating cost and increase the quality of the bank;
2. Nepal Rastra Bank has to make necessary arrangement for restructuring and rescheduling of loans by extending the grace period for the recovery of loans affected from the covid -19;
3. If the interest rate on institutional term deposit is significantly reduced and the interest rate in individual term deposit is kept slightly higher than inflation, the overall interest rate on loans will also be lower;
4. To extending loan invested by the banks to facilitate the business operation of the industries for some time to come;
5. By extending loans to the productive sectors by taking loans at cheap rate from various international bodies, which will improve the balance of payments situation in the overall economy and compensate for the declining income of the bank from declining remittance and other non-cash transactions;
6. If some concessions are given in the minimum liquidity ratio to be maintained by the banks, the banks can increase extensively.

This pandemic has brought the golden opportunities for the banks to move towards self-reliance by extending credit to agriculture and other micro- enterprises. If these challenges can be turned into opportunity, not only banking sectors but overall economy will be strengthened.