Quick on-lending of health fund ordered

„Banks have to disburse loans in 30 days

The Reserve Bank of India (RBI) on Friday said that banks seeking funding from its special Rs 50,000 crore ‘on-tap term liquidity facility’ to on-lend to Covid-related healthcare services, should do so within 30 days from the date of availing of the funds from it. The banks will have to ensure that the amount borrowed from it should at all times be backed by lending to the specified segments till the maturity of the scheme.

The RBI early this week announced a Rs 50,000 crore liquidity window to banks under priority-sector lending to augment Covid-19 healthcare infrastructure to help raise treatment capacity, and availability of medicines and medical equipment in India. Loans under the scheme, for tenures up to 3 years, are available to banks at the repo rate till March 31, 2022. Such loans would also be classified under priority sector.

Consequently, banks are expected to extend these loans below current interest rates for companies engaged in health care activities. These include makers and suppliers of vaccines and drugs; hospitals; pathology labs; suppliers of oxygen; makers of emergency medical equipment; logistics firms; and Covid-19 patients.

According to Crisil Ltd, hospitals could be among the biggest beneficiaries as

the incremental funding can potentially increase bed capacity in the country by 15-20 per cent. “As many as 354 Crisil-rated companies with aggregate bank exposure of Rs 40,000 crore will be eligible for such loans. Though pharmaceutical firms account for 68 per cent of rated bank exposure, hospitals at around 24 per cent of rated exposure are likely to avail majority of the funding available,” said the rating agency.

The borrowing cost of hospitals rated by Crisil are 10.5-11 per cent and the new loans taken for expansion under this RBI scheme could be 300-350 basis points cheaper, leading to substantial interest

savings.

Subodh Rai, chief ratings officer, Crisil Ratings said, “Increased availability of funds at low cost will incentivise hospitals to augment beds, oxygen storage, ICUs and critical medical equipment. Even if half of the funding available is used to add hospital beds through brownfield expansion, it will mean about 5 lakh incremental beds, or 15-20 per cent of India’s current capacity.”

In comparison, for entities in other health care related sectors such as pharmaceuticals, the capital requirements for enhancing production capacity of critical Covid19 related drugs is not very high.