Banks have come up with three sets of products to build a “COVID book” under the Reserve Bank of India’s (RBI) liquidity scheme and the expanded Emergency Credit Line Guarantee Scheme (ECLGS 4.0) for healthcare institutions, the State Bank of India (SBI) chairman Dinesh Khara said on May 30.
The measures include a healthcare business loan for setting up oxygen plants, business loans for healthcare facilities and unsecured personal loans for COVID-19 treatment.
The last two sets of loans will be available at concessional rates, while rates on loans for oxygen plants will be capped at 7.5 percent.
For COVID-19 treatment, loans of Rs 25,000 to Rs 5 lakh can be availed with a tenure of five years. The rate of interest will stand at 8.5 percent at SBI. Individual loans will be available digitally. The products have been standardised with approvals from all the PSBs’ boards last week, said Rajkiran Rai, MD & CEO, Union Bank of India.
The Centre on May 30 announced an expansion of the emergency credit line guarantee scheme, calling the revised scheme 'ECLGS 4.0', in view of the economic disruptions caused by the second wave of COVID-19 pandemic. The scheme includes a 100 percent guarantee cover for loans up to Rs 2 crore to hospitals and other medical institutions for setting up on-site oxygen generation plants, with the interest rate capped at 7.5 percent.
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Of the total kitty of Rs 3 lakh crore available under the ECLGS framework, Rs 2.54 lakh crore of loans have already been covered and there is a lending window available for roughly Rs 45,000 crore, said Sunil Mehta, chief executive officer, Indian Banks’ Association (IBA).
Khara said that while there is no specific amount given by the Finance Ministry for lending towards COVID relief, SBI's preliminary assessment is that it should be in a position to build a book of about Rs 2,000 crore. “That, of course, will be over and above ECLGS 4.0 which is essentially for oxygen plants where the maximum limit is covered up to Rs 2 crore. Much of it we are assessing the potential and we will be in a position to share details in due course,” Khara added.
For restructuring, three categories for micro, small and medium enterprises (MSMEs) have been evolved. Loans up to Rs 10 lakh will be approached in the traditional way of communication with customers and inviting applications. For Rs 10 lakh to Rs 10 crore, there will be a graded approach. For loans above Rs 10 crore, banks will offer standardised application and assessment formats, with simplified documentation.
“So, the idea behind it is that those who are involved in the implementation of the resolution framework, they should not have any hardship in terms of any implementation. It will all be quite templatised. That is something we want to emphasise,” Khara said.
Customers will have to apply for recast on the website or manually at bank branches. Resolution process will be invoked in 30 days and the last day for invocation is September 30, 2021. The resolution plan will be implemented within 90 days, or latest by December 31, 2021. The moratorium period will be a maximum of two years, starting soon after invocation.
Bulk SMSes have already been sent to eligible customers, Khara said. Databases of eligible customers will be sent to branches. For ECLGS-covered oxygen facilities, PSB branches will approach them proactively.
On May 5, the RBI had allowed lenders to carry out a fresh round of restructuring of retail and MSME accounts. Individuals and small businesses with loans of up to Rs 25 crore who have never undergone restructuring before and who were classified as standard as on March 31, 2021 are eligible under the new scheme, titled 'resolution framework 2.0'.
The ECLGS proved its value at the time of the first wave of COVID-19 and it will serve the economy this year too, Khara said.
“The resurgence of COVID-19 pandemic in India in recent weeks and the associated containment measures adopted at local/regional levels have created new uncertainties and impacted the nascent economic revival that was taking shape. In this environment the most vulnerable category of borrowers are individual borrowers, small businesses and MSMEs,” RBI Governor Shaktikanta Das had said.
Among other measures, the central bank opened an on-tap liquidity window of Rs 50,000 crore with tenors of up to three years at the repo rate for ramping up COVID-related healthcare infrastructure and services in the country.
It had also announced special three-year long-term repo operations of Rs 10,000 crore at the repo rate for small finance banks, to be deployed for fresh lending of up to Rs 10 lakh per borrower.To enable states to better manage their fiscal situation, the RBI relaxed conditions for accessing overdraft facilities. The maximum number of days of overdraft in a quarter was increased to 50 days from 36 days earlier and the number of consecutive days of overdraft to 21 days from 14 days.