IMPACT OF THE COVID-19 PANDEMIC ON BANK LENDING: AN ANALYSIS OF RISK PERCEPTION AMONG BANK MANAGERS IN INDIA

With the onset of Covid 19 pandemic, the world experienced unprecedented disruptions in all aspects of life. It not only affected physical health but also affected economies of the world. In addition to impacts on physical health, it has also caused dramatic changes in the financial markets and institutions. A healthy banking system is crucial for the liquidity of the economy and the smooth flow of credit in the system. Amidst all this, the major interest of the policymakers lies in the alteration of the lending practices of the banks when faced with increased uncertainty and risk. This paper aims to present new evidence regarding the lending decisions made by the banks during Covid pandemic across multiple countries. It is a unique opportunity to study these effects in different countries of the globe. In response to the pandemic, the Central banks introduced monetary stimulus measures to address the concerns of the business with regards to solvency and liquidity. Also, many countries launched extraordinary credit guarantee programs to support businesses during this challenging time.These loan guarantees, sometimes paired with government purchases of corporate bonds, have been essential tools for infusing liquidity to the struggling businesses. This paper calculates the shock of Covid 19 on bank lending in India and how risk perceptions of bank managers changed during this challenging period.