(PDF) Covid-19 Impact of Banking Sector

Impact of COVID-19 on Bank Performance:
Perception from Bangladesh
Abstract:
The COVID-19 pandemic has had an enormous impact on the worldwide economy. The banking
sector of Bangladesh has been seriously affected that contains three aspects: short-term, long-
term, and systemic risks. We have analyzed several research articles to reach on a concluding
remarks about the impacts of the issue. Support for differentiated financial services for pandemic
prevention and control is needed, with increased credit support. Medium-to-small enterprises
need to be supported through special credit lines, reduced interest rates on loans, deferred
repayments, and establishment of long-term credit systems. But the outbreak of the COVID-19
pandemic is an unusual shock to the Bangladesh economy causing the increase in the lending
rate of the banks. In Bangladesh, all banking transactions are still comprehensively dependent on
paper or documents. One has to fill out pages of forms, submit copies of identity documents,
photographs, TIN certificate, etc. in paper with wet signature for opening an account. To file
taxes or to buy a car or if a person receives remittance from overseas or even if a factory owner
needs to import raw material, For almost everything related to banking, it is essential to visit the
branch. So that a digital transformation needs to take place at a faster rate to improve intelligent
risk control systems. Besides, the economy of Bangladesh was already in a perilous state before
COVID-19 struck because of the high level of non-performing loan in the banking sector. After
the attack of the pandemic this situation have been worsen referring to the state that a fall in risk-
weighted asset values, capital adequacy ratio, and interest income at the individual bank and
sectorial levels. The economy is likely to face a protracted period of slow down because of the
prolonged country-wide lockdown, global economic downturn and associated disruption of
demand and supply chains. In this paper we have described the state of the Bangladeshi banking
sector in the pre-Covid-19 period and post-Covid-19 period and assess the possible influence of
the shock on various segments of the banking sector, also analyze the policies that have been
announced so far by the central government and the Bangladesh Bank to deteriorate the
economic shock and put forward a set of policy recommendations for specific sectors. As the
Banking companies which are backbone of Bangladesh economy are the main affected parties
after COVID-19, this article is an attempt to analyze bank stock prices around the world to assess
the impact of the COVID-19 pandemic on the banking sector. We have also analyzed the impact
under the comparison of the global banking industry and its consequences in Bangladesh.
Besides we have analyzed how the SMEs have fallen because of the COVID consequences
occurring laying down employees, cutting the salaries by 15-20%. So that, because of the falling
productivity of the businesses the demand for loans have been decreased causing distress in the
banking sector. We have also discussed in this paper how the result of increased new cases and
death due to COVID magnifies fear and stress among the people from banking sectors due to
direct exposure with the public and not being able to maintain proper social distance The

conclusion in this regard is based on the views expressed by several groups including
economists, financial institutions like IMF, World Bank and consulting firms.
Methodology:
After studying that COVID has put along a serious impact on various aspects like SME banking,
psychological consequences on the bank officials and also the interest rate, liquidity, capital
adequacy, non-performing loans of the banking sector, we conclude that the performance of the
banking sector of Bangladesh shows a negative remarks on that issue. Through the whole
research process we have used the secondary data collected by others and also some primary
data’s from different journals have been use. References are included later on. This research is
basically dependent on the quantitative data but various qualitative data such as the mental health
impact among bankers, Demographic Variables and Factors Related to COVID-19 are included
for analyzing the impact (Yasmin et al., 2021).
Here we have developed multiple methods of research designs such as in one study the concept
of descriptive studies has been developed. Such studies are mostly conducted to explain a
phenomenon of interest rather than making interpretations and judgments. The current study is
descriptive in nature. This research is explanatory in nature and provides useful information
about the impact of stress management of bankers in Bangladesh (Kunt et al., 2020).
We also used cross-sectional method of research design in another study which is used for
descriptive purposes. There is a significant positive correlation between depressions, anxiety
scale and COVID outbreak which have been developed by correlational matrix of the similar
study report (Yasmin et al., 2021).
I. Sample design:
The population for this research included the banking personnel from different private and public
commercial banks in Bangladesh. A convenience sampling technique was used to select the
organizations as well as employees of those organizations. Cluster sampling is use in the studies
which is a method of probability sampling that is often used to study large populations,
particularly those that are widely geographically dispersed. Researchers used pre-existing units
such as banks or cities as their clusters. Simply this sampling technique focuses on obtaining
relevant data from the people who are conveniently available. Both married and unmarried
employees have taken into consideration to understand their stress level at workplace (Yasmin et
al., 2021). There are 177 clusters in Bangladesh, of which 129 falls under Booster sectors and 48
under Non–booster sectors use in one study report (Qamruzzaman., 2020). and 3,043 firms, of
which 896 are commercial banks and 2,147 correspond to non-bank financials globally in
another (Kunt et al., 2020). Where the positions of the employees were categorized into top
level, mid-level, and lower level. The respondents were all either graduate or post graduate

employees who were considered as icons in the concerned positions of those organizations.
Respondents were assured that information will be kept confidential and used only for academic
purpose (Qamruzzaman., 2020).
II. Variables:
One study examines the impact of COVID-19, on banks liquidity of Bangladesh. In This study
the variables are examined through regression analysis by using the description of the variables
i.e. Bank liquidity as dependent variables and Trend in affected case, Trend in death case, Log
GDP, Inflation and Investment freedom as Covid19 variables. Log GDP (GDP) equals the
natural logarithm of annual gross domestic product (GDP). And Inflation (INF) is measured by
the Consumer price annual rate of inflation %. Authors' calculated based on data collected from
various rwweliable sources like John Hopkins, World Development Indicators database, World
Bank etc. (Rahman et al., 2020). Another study contains the variables like depression, anxiety,
and stress using International Journal of Mental Health and Addiction as the sources of
information (Yasmin et al., 2021).
III. Data Collection
Primary and secondary data were used for the study. Primary data were collected through the
printed survey questionnaires followed by direct personal visit. Around 246 usable responses
(82%) were received from 300 respondents who were working at different private commercial
banks in Bangladesh (Barua & Barua., 2021). The secondary data were collected from journals,
books, magazines, websites, and so on. We used survey methods of data collection in our whole
collection process. Survey research means collecting information about a group of people by
asking those questions and analyzing the results. Before we start conducting survey research, we
should already have a clear research question that defines what we want to find out. Based on
this question, we need to determine exactly who we will target to participate in the survey that
means the target population of our research. For example:
The population of Bangladesh
The public and private banks of Bangladesh.
Then we decide for the sample size and characteristics. Decision on the type of survey is
conducted afterward.
Some of the studies conducted through questionnaire, where a list of questions is
distributed by mail, online or in person, and respondents fill it out themselves (Yasmin et
al., 2021).
Again some uses interview method, where the researcher asks a set of questions by phone
or in person and records the responses.