COVID patients can get bank loans for treatment after Indian central bank’s fresh set stimulus measures

• The Reserve Bank of India (RBI) has announced a ₹50,000 crore lending programme, as part of a larger stimulus plan
• Banks have been allowed to lend money to Covid patients who need money for treatment, aside from hospitals, dispensaries, manufacturers, importers and sellers of oxygen and concentrators.
• The window for such loans will shut on March 31, 2022, as of now, said the RBI Governor Shaktikanta Das.

The Reserve Bank of India (RBI) has announced a ₹50,000 crore lending programme, as part of a larger stimulus plan, to ease the devastating impact of the second wave of the COVID-19 pandemic.

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

The tenure 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 such loans will shut on March 31, 2022, as of now, said the RBI Governor Shaktikanta Das. “The immediate objective is to save human lives and livelihoods,” he said in his unscheduled address to the media on May 5.

"The announcements from RBI will also provide much needed liquidity to the emergency healthcare sector to battle the proliferating spread of the virus. A new term liquidity facility for healthcare sector at the repo rate will aid in ramping up covid related healthcare infrastructure and production and supply of essential healthcare products such as vaccines, oxygen and ventilators. It will also benefit patients burdened by unaffordable covid related medical bills," 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 the needs of emergency funding. The money that banks borrow from the central bank for this purpose will be given at a rate 25 basis points (bps) less than the current repo rate of 4%. 100 basis points make a percentage.

The surplus funds (money not lent at any point) in that loan book can be parked with the RBI at a rate that’s 40 bps more than the reverse repo rate i.e., 3.35% (the usual rate that banks get for parking money with the RBI).

"This will ensure that banks accelerate the provision of liquidity for emergency healthcare services so that India is better equipped financially to deal with the pandemic," Shah explained.

Micro, medium and small enterprises (MSME), who have borrowed ₹25 crore or more from banks, can get the repayment schedule restructured, if they want to, before September 31, 2021.

"The additional restructuring guidelines for to MSMEs, small businesses and individuals will assist them tide over the uncertainties caused due to the second wave. These guidelines as well as the recently introduced pre-arranged insolvency resolution process will enable MSMEs to restructure their debts without the looming fear of losing or liquidating their businesses," said Shah.

Small finance banks can get additional long-term funds from the RBI (up to a total of ₹10,000 crore) to make fresh loans to borrowers up to ₹10 lakh per borrower.

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