Bank loans

COVID patients can get bank loans for treatment after Indian central bank’s new stimulus

  • the Reserve Bank of India (RBI) announced a ₹50,000 crore loan scheme, as part of a wider stimulus package
  • Banks were allowed to lend money to covid patients who need money for treatment, outside of hospitals, dispensaries, manufacturers, importers and sellers of oxygen and concentrators.
  • The window for these loans will close on March 31, 2022, from now on, RBI Governor Shaktikanta Das said.

The Reserve Bank of India (RBI) has announced a ₹50,000 crore loan scheme, as part of a broader stimulus package, to mitigate the devastating impact of the second wave of the COVID-19 pandemic.

Under this ₹50,000 crore liquidity facility, banks have been allowed to lend money to Covid patients who need money for treatment, excluding hospitals, dispensaries, manufacturers, importers and sellers of medical oxygen and oxygen concentrators.

The tenor of these loans will be a maximum of 3 years and the interest rate will be the same as the repo rate (the rate at which banks borrow money from the RBI).

The window for these loans will close on March 31, 2022, from now on, RBI Governor Shaktikanta Das said. “The immediate objective is to save lives and livelihoods,” he said in his unscheduled address to the media on May 5.

“RBI’s announcements will also provide much-needed liquidity to the emergency healthcare sector to combat the proliferative spread of the virus. A new term liquidity facility for the healthcare sector at the repo rate will help bolster infrastructure healthcare costs and the production and supply of essential healthcare products such as vaccines, oxygen and ventilators. This will also benefit patients burdened with unaffordable medical bills related to covid,” said Aashit Shah, Partner, J Sagar Associates.

Some of the other announcements made by the RBI Governor are as follows:

Banks have been allowed to create a separate COVID-19 loan book that will meet emergency funding needs. The money banks borrow from the central bank for this purpose will be given at a rate 25 basis points (bps) below the current repo rate of 4%. 100 basis points is a percentage.

Excess funds (money not lent at any time) in this loan portfolio can be parked with the RBI at a rate 40 basis points above the reverse repo rate i.e. 3.35% (the usual rate banks get for parking money with the RBI).

“This will ensure that banks will speed up the provision of cash for emergency health services so that India is better equipped financially to deal with the pandemic,” Shah explained.

Micro, Medium and Small Enterprises (MSMEs), which have borrowed ₹25 crore or more from banks, can have the repayment schedule restructured, if they wish, by September 31, 2021.

“The additional restructuring guidelines for MSMEs, small businesses and individuals will help them overcome the uncertainties caused by the second wave. These guidelines together with the recently introduced pre-arranged insolvency resolution process will allow MSMEs to restructure their debts without the imminent fear of losing or liquidating their businesses,” Shah said.

Small financial banks can obtain additional long-term funds from the RBI (up to a total of ₹10,000 crore) to provide new loans to borrowers up to ₹10 lakh per borrower.

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