The pandemic due to COVID-19 has ushered in an inflection point in the entire banking system which is going to bring in radical changes in terms of lending parameters, MD and CEO of Axis Bank Amitabh Chaudhary said 

Speaking at a session on financial system organised by XLRI, he said that the COVID crisis has created a huge disruption in the banking system in the country where individual banks are feeling its impact.

He said that due to the pandemic, individuals ability to repay loans has reduced significantly while 90 per cent of the banks’ books is in moratorium. 

“The crisis has increased the health costs and the average individual household needs money while banks at the same time will have to be more cautious. A vicious negative cycle has set in while discretionary spending has hit an all time low”, Chaudhary said.

At Axis, he said the bank has been able to raise capital to provide comfort to the depositors while the provision coverage ratio has gone up from 70 per cent to 124 per cent.

Chaudhary said that the bank had also been modernising its monitoring aspects leading to fall in GNPA and NNPA levels.

According to him, the banking system will have to opt for more granular mode using artificial intelligence (AI) and machine learning (ML) which will form the basis of lending decisions.

Chaudhary also said that data points like credit card payments and salary pay-outs will also be used for taking a lending decision.

This, he said, will be supplemented by robust underwriting, also determine the long-term survival potential of the sectors and also look at the history of the promoters who are seeking loans.

Chaudhary said Axis bank had activated its quick response team before the crisis surfaced in India looking at the experience of China.

He also said that for the first time, stress is building up in the retail sector putting the banks in a precarious situation which will have an impact on the price of loans and interest rates.