Bank of India (BoI), on Monday, said its profitability may get impacted in the first and second quarters due to the nationwide lockdown of economic activities. The lockdown, which was imposed to contain the spread of the Covid-19 pandemic, began on March 25, and was spread over four phases.

The government has come up with guidelines for phased re-opening of areas outside the Containment Zones with effect from June 1 till June-end. Lockdown measures, however, continue to be in place in the containment zones.

The public sector bank, in an exchange filing, observed that due to postponement of repayment of principal and interest from March 1 toAugust 31, its recoveries may get affected from Q2 (July-September 2020) onwards. Due to this, the revenue and provisioning of the bank may get affected in later quarters, it added.

“However, with the measures being taken by Government of India and various State governments, the position is expected to improve.

“...Hopefully, profitability will improve during second half of the current financial year subject to restoration of normal economic activity,” as per the filing.

BoI assessed that the outbreak of the pandemic had impacted credit and recovery segments.

Though there was an impact on recovery, loan default risk has been largely minimised on account of grant of moratorium on repayment of loans and other measures announced by the Reserve Bank of India (RBI) to reduce the interest burden.

The bank emphasised that it does not foresee any capital and liquidity constrains on account of impact of Covid.

BoI said it is having sufficient liquidity to honour its debts and other financial arrangements. The RBI has also opened its window to provide liquidity to MSME (micro, small and medium enterprises) and other borrowers, it added.

The bank assessed that demand for banking products may improve during second half of the current financial year, subject to restoration of normal economic activity.

Published on June 01, 2020

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