RBI to provide 50,000 crore liquidity for extending Covid 19 loans to health care

The RBI had announced on Wednesday about the immediate liquidity of Rs. 50,000 crore for the banks to let them extend covid loans to health care companies and the industry as a whole. This window would be available at the repo and would continue existing until the 31st of March, 2022. Under this facility, banks can start extending their support to vaccine manufacturers, hospitals and patients for treatment as well. Banks may have peaked lending spreads, experts say

Banks have also opted in for quick disbursal of the credit under the scheme through the extension of the priority sector classification upto 31st March 2022. 

The RBI governor, Shaktikanta Das has said that “The loans will continue to be classified under the priority sector till repayment or maturity, whichever is earlier.”

The chairman of the State Bank of India, Dinesh Kumar Khara, in a recent interview with CNBC TV 18, stated that these measures would assist in building the infrastructure for the health industry and will motivate the banks to create Covid books.

The banks are anticipated to create a covid loan book under this facility. Those banks would become eligible to park their surplus liquidity upto the size of the Covid loan book under the reverse repo window at a starting rate that is 40bps higher than the previous reverse repo rate

Chairman Khara also mentioned that two vaccine manufacturers have already approached SBI for loans, and were given the loans under this new scheme.

Most of the bankers also feel that this scheme approved by the RBI would make access to emergency health services way easier. The CII president Uday Kotak had stated that “RBI giver has taken the financial sector battle against Covid 2.0 head-on with a  clear focus on protecting lives and livelihoods.”

The Managing Director and CEO of the Punjab national bank, SS Malikarjuna Rao, stated that on-top liquidity of the Rs. 50,000 crore for Covid-related health care sector followed with the incentives and higher interest on the surplus liquidity window would continue to make the access to healthcare services relatively easier and more reachable. 

Due to this scheme, the banks can now extend their support to a variety of industries including vaccine manufacturers; pathology labs; importers of vaccines and COVID related drugs; hospitals/dispensaries; importers/suppliers of vaccines and priority medical devices and logistics firms and also patients for their treatment.

Reflecting on the views of many bankers, the executive chairperson of Religare Enterprises, Rashmi Saluja, stated that: “ The central bank has shown a lot of foresight by announcing flow of unhindered liquidity to the healthcare sector in order to boost production of the vaccine, Covid-related medicines and ramp up oxygen supplies.” This special lending window of Rs 50,000 crore has been classified under priority sector lending and will ensure a steady flow of loans to the healthcare sector, she added.

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