Page 74 - BFSI CHRONICLE 10 th Issue (2nd Annual Issue ) 23062 COPY.indd

BFSI Chronicle, 2 Annual Issue, 10 Edition July 2022
th
nd
be evaluated proficiently. But if the banking global health crisis that quickly morphed into
system is slanted, that will lead to distortions a grave economic crisis. The combined force
in the rest of the financial sector as well. Hence, of this crisis has severely impacted markets
the more sources of finance in a competitive and individuals globally. Millions have
framework, the better placed the financial been unemployed or furloughed at home.
sector is to play its role. Companies and businesses, especially smaller
ones, have been crippled by low or no revenue.
These conclusions have recently been
strengthened by work done by Prasad, Rajan The crisis highpoints the necessity for pressing
and Subramanian. In evaluating the role of action to cushion the pandemic’s health and
foreign capital inflows on growth, they found a economic costs, protect exposed populations,
distinct difference between industrial countries and set the stage for a eternal recovery. For
(where inflows on average spur growth after emerging market and developing countries,
controls are introduced for the standard many of which face daunting vulnerabilities,
growth-determining variables) and low- it is essential to empower the public health
income countries, where the evidence suggests systems, address the challenges postured by
a perverse link (and where there are net capital informality, and instrument reforms that will
flows from poor countries to richer ones). They provide back up for strong and sustainable
also note that this obstinate link is not found for growth once the health crisis subsides.
direct foreign investment.
Banks are at a make-or-break moment. The
Clearly, the financial sector is not the key to pandemic was the eventual intuitive punch,
development, any more than human capital or testing banks’ resilience in unanticipated
physical capital growth were. However, failure ways. Yet, they are emerging sturdier. And they
to develop the financial sector can put an now have found a fresh principle: They can
huge brake on growth prospects and, indeed, overcome practically any challenge that comes
if the issue is not addressed, can prevent their way. In this crisis, the financial sector and
development efforts. For countries where the large financial institutions that provide
there is a strong obligation to growth, the credit, enable access to capital and support
lesson is clear: devotion needs to be rewarded secondary markets have been a key part of
to financial sector issues as growth proceeds, the solution. They assisted stabilize volatile
unless it is preferred to wait for a crisis to force markets, cushioned the initial influence of the
the necessary reforms. economic shutdown, provided much-needed
liquidity to customers and helped to swiftly
Role of Financial markets in Covid 19 reinstate confidence, thereby significantly
situation
restraining the degree of the economic impact
The sudden occurrence of COVID-19 pandemic of the pandemic.
has impacted the global economy severely and
at pace. Although the global markets have Conclusion
already become accustomed to economic Economic theory suggests that sound and
shocks due events happening in the past efficient financial systems—banks, equity
century, however, the COVID-19 pandemic markets, and bond markets—which channel
was different because it stemmed from a capital to its most productive uses are beneficial

The Institute Of Cost Accountants Of India

74