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The IMF recently projected a deep (-4.9 per cent) contraction of the global economy in 2020, with advanced economies likely to be particularly vulnerable. The agency expects the Indian economy to contract by 4.5 per cent, a historic low. The downturn, stress in corporate loans in severely affected sectors, including travel, hospitality, aviation and retail, are set to impact banks’ earnings across the board. But, beyond this short-term stress, the crisis will also serve as a ‘tipping point’ to drive long-term positive changes in the sector. In his 2007 eponymous bestseller, Malcolm Gladwell defined ‘tipping point’ as the “magic moment when an idea, trend, or social behaviour crosses a threshold, tips, and spreads like wildfire.” Over the last few years, banks had already started re-imagining their operations and business models. Covid-19 has only accelerated it.
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