Public Sector Banks (PSBs) have announced to provide unsecured loans of upto ₹5 lakh to individuals to meet their and family members’ COVID-19 treatment cost. This comes in the wake of the ongoing second wave of the pandemic that has swept across the country unleashing untold miseries on families across income groups.
This forms part of three new loan products announced by them on Sunday to provide fresh lending support to vaccine manufacturers, hospitals/dispensaries, pathology labs, manufacturers and suppliers of oxygen, ventilators, importers of vaccines & COVID related drugs logistics firms and individuals suffering from COVID-19.
As per these announcements made at a joint press conference by Indian Banks’ Association (IBA) and State Bank of India (SBI), individuals including salaried, non-salaried and pensioners can avail unsecured personal loans from ₹ 25,000 to ₹ 5 lakh to meet COVID-19 treatment. The repayment tenure is 5 years and SBI would charge interest of 8.5% per annum. Other banks are free to decide their interest rate.
The PSBs have also offered to provide upto ₹2 crore as healthcare business loan to existing hospitals, nursing homes for setting up oxygen plants along with power back up system under the ECGLS. Capped at an interest rate of 7.5% these loans are backed by 100% guarantee cover of National Credit Guarantee Trustee Company Ltd (NCGTC) under ECLGS 4.0 which was announced by the Department of Financial Services and Government of India. The loan tenure is 5 years.
The banks have also come out with business loans for healthcare facilities. Upto ₹.100 crore each would be advanced to firms in Metro cites to setup/expand healthcare infrastructure and to manufacturers of healthcare products such as vaccine and ventilators. While firms in Tier 1 and urban centres can avail loans of upto ₹ 20 crore, the ones in Tier II to Tier IV can avail upto ₹ 10 crore. The loan tenure is 10 years.
All these schemes being offered by PSBs will form part of the COVID loan book and are under priority sector lending.
The Reserve Bank of India (RBI) on May 5, 2020, had announced several measures such as term liquidity facility of ₹50,000 crore COVID loan book to ease access to emergency health services, Resolution Framework 2.0 for COVID related stressed assets of individuals, small businesses and MSMEs, and re-assessment of working capital limits.
Besides, the Government of India to provide support to MSMEs has announced modifications to the ECLGS Scheme by enlarging its scope. The validity of ECLGS has been extended to September 30, 2021 and disbursement is permitted up to December 31, 2021.
Addressing the press conference SBI chairman Dinesh Khara, IBA chairman Rajkiran Rai and CEO Sunil Mehta said the new measures and loan products were aimed at mitigating the impact due to resurgence of COVID pandemic.
“It is more of a pro active step to mitigate potential hardship that the MSMEs could face during the second wave,” Mr Khara said.
To implement the expanded ECLGS measures, the PSBs have put in place systems and processes for seamless implementation of RBI’s Resolution Framework 2.0, they said. Declining to comment on the likely number of resolution applications by the MSMEs this time, Mr Rai said last time out of the 8.5 lakh eligible firms only 60,000 had availed the facility.
In regard to Resolution Framework 2.0, PSBs have formulated Templated Approach for restructuring of loans.
Recently the government had announced collateral free automatic loans worth ₹ 3 lakh crore for MSMEs out of which ₹ 2.54 lakh have been sanctioned, IBA and SBI officials said adding there was still headroom to lend another ₹ 46,000 crore under this scheme.
Mr Khara said that as per the government policy aviation companies will get loans of upto ₹ 200 crore to deal with the crisis.
Anil Gupta, VP, Financial Sector Ratings, ICRA on the enlarging of the scope of ECLGS said, "With the second wave of COVID-19 and incremental stress on debt servicing of the borrowers, relief measures under ECLGS will support liquidity position of the borrowers, apart from incremental stress on asset quality of lenders."
"The government will also not be burdened with additional cost because of the second wave and this will also improve the utilisation of overall ECLGS funding pool available," he added.