Limits of progress

Covid-19 still poses risks for the banking system

The banking sector was expected to suffer significantly because of the pandemic-related economic disruption. India opted for one of the most stringent lockdowns in 2020 to contain the spread of Covid-19. Even as the nationwide lockdown was gradually lifted, local restrictions remained in various parts of the country for quite some time, which affected businesses. Consequently, the gross domestic product in 2020-21 contracted by 7.3 per cent in real terms. Economic activity was again affected by the second wave of the pandemic in the first quarter of the current fiscal year. However, the impact on the banking sector has been