Reserve Bank of India (RBI) Governor Shaktikanta Das
The Reserve Bank of India’s measures to make easy liquidity available to the healthcare sector, including vaccine and medical equipment makers and companies offering COVID-19 emergency services was welcomed by the industry, hospitals and analysts.
RBI Governor Shaktikanta Das announced on May 5 an on-tap liquidity window of Rs 50,000 crore to boost provision of immediate liquidity for ramping up COVID-related healthcare infrastructure and3 services in the country.
Under the scheme, banks can provide fresh lending support to a wide range of entities, including vaccine manufacturers, importers, suppliers of vaccines and priority medical devices, hospitals, dispensaries, pathology labs, manufacturers and suppliers of oxygen and ventilators, importers of drugs; logistics firms and also patients for treatment.
"It's a good move from the government and the RBI, at time when the industry is going through lot of challenges of raw material supplies, lockdowns and COVID-19 second wave" said an executive at one of India’s major vaccine companies on condition of anonymity.
Dr Alok Roy, Chairman of Kolkata-based Medica Superspecialty Hospital and FICCI health Services Committee welcomed the RBI decision to make liquidity available for companies offering COVID-19 emergency services. "It's a good decision, we will apply immediately for Rs 100 crore credit, as we are looking to expand our services," Roy said.
He said that fresh capital had been tough to come by as it comes with lot of strings attached, and any easing of liquidity for healthcare industry was a good sign.
In his address, Governor Das said that banks will be incentivised for quick delivery of credit to the health sector through extending the classification of such loans as priority sector lending till March 31, 2022.
“These loans will continue to be classified under priority sector till repayment or maturity, whichever is earlier. Banks may deliver these loans to borrowers directly or through intermediary financial entities regulated by the RBI,” he said.
Covid Loan Book
Banks giving out such loans will create a COVID loan book under the scheme. By way of an additional incentive, such banks will be eligible to park their surplus liquidity up to the size of the COVID loan book with the RBI under the reverse repo window at a rate which is 40 basis points higher than the reverse repo rate, Das said.
These measures will be a sizeable boost to all stake holders in the healthcare sector, said Dr Vivek Talaulikar, CEO at Global Hospital, Mumbai “We value this announcement and find it benevolent for the healthcare sector,” he said.
“This COVID-19 loan will qualify as ‘Priority Sector Lending’ will therefore incentivise bank to lend quickly. This will ensure availability of liquidity and address immediate funding need to scale up operations to deal with the second wave of COVID-19 surge on an instantaneous basis,” said Rajosik Banerjee, Partner and Head - Financial Risk Management, KPMG.
However, some including the vaccine company executive and heads of a major hospital, said they would wait for the finer details of the scheme, especially on whether working capital requirements can also be met from the loans.
"It helps companies like us doing COVID-19 vaccine projects. We need to see the fine print, if this liquidity facility is also extended for working capital requirements," the executive said.
"Any kind of liquidity is good for healthcare system, it helps us to expand our services. But we are looking for the finer details," said Ranjan Pai, Chairman of Manipal Education and Medical Group.