Rs 50,000-crore soft loan scheme for pvt hospitals find few takers, govt to extend scheme for 6 more months

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A Rs 50,000-crore loan guarantee scheme started by the Union government in 2021 to help private sector hospitals set up or upgrade units in non-metro cities and towns to prepare for future waves of the COVID-19 pandemic and beyond has met with a dismal response.

With less than 5 percent of the sum allocated under the Loan Guarantee Scheme for COVID Affected Sectors (LGSCAS) availed of so far, the finance ministry is now likely to extend the scheme, which was to expire in March, for another six months, government sources told Moneycontrol.

Under LGSCAS, through which scheduled commercial banks were to provide credit with interest rate capped at 7.95 per cent per annum for projects in the healthcare sector, a maximum of Rs 100 crore per project was to be disbursed.

The loan guarantee scheme was announced as part of Rs 6.29-lakh-crore stimulus package by finance minister Nirmala Sitharaman early last year and approved by the Union Cabinet in June 2021. It was to be applicable to all eligible loans sanctioned up to March 31, 2022, or till an amount of Rs 50,000 crore is sanctioned, whichever was earlier.

“While less than 5 percent of the total amount on offer has been credited so far by two commercial banks, even that amount has not been utilised yet,” a senior government official said. “We are now looking to extend the scheme till September this year.”

The loans under the plan could be given for setting up, modernising or upgrading hospitals, clinics, dispensaries, medical colleges, pathology labs and diagnostics centres, facilities for manufacturing of vaccines and oxygen plants, and to install crucial apparatus such as ventilators and other priority medical devices.

These were meant for projects across India except eight metropolitan cities—Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai and Pune.

The guarantee coverage provided by the National Credit Guarantee Trustee Co Ltd was to cover up to 75 per cent in greenfield projects and 50 percent in brownfield projects.

“There was also a provision of a flat 75 per cent guarantee for aspirational districts but this scheme has failed to kick off in the way planned and the main reason could be a near complete lack of adequate publicity,” said Girdhar J Gyani, director general of the Association of Healthcare Providers of India, a network of private hospitals across the country.

An industry source attached with the Confederation of Indian Industry, on the other hand, said that while this is a scheme with good intentions, the loan guarantee scheme is not free money.

“It is a loan that needs to be repaid with interest, disbursed by commercial banks who are earning interest above MCLR (marginal cost for funds based lending rate), taking collateral and charging for loan processing,” he said.

“The guarantee is for a maximum of two to five years, after which it reverts to commercial interest rates. The borrower faces all the business risks and will get classified as a defaulter in case they default on payments.”

He also rued that many hospitals and nursing homes that didn’t have enough money to pay salaries during the pandemic were liquidated by their banks.

“Please remember that an entrepreneur’s desire to set up a hospital is driven by the need to make a difference, but the financial model has the final say,” he stressed.