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COVID-19: Banks ready health booster shot


(This story originally appeared in on May 07, 2021)

Banks are set to launch multiple schemes under the RBI’s Rs 50,000-crore on-tap liquidity window announced on Wednesday. The schemes are aimed at rapidly boosting private investment in healthcare and financing individuals who have contracted Covid.

In a meeting with the finance ministry, large public sector banks discussed the possibility of making available credit online using the liquidity facility. Banks will go to the drawing board and will design the schemes with extremely competitive rates and draw up the eligibility criteria.

According to bankers, a ramp-up in capacity in pharma and hospitals can be done only through brownfield projects, where existing units expand. This includes adding new lines for drugs, adding oxygen plants, and increasing the number of beds in hospitals. The creation of private capacity in healthcare is seen as important as government hospitals may find it difficult to get doctors. Greenfield capacity is expected to come up in the form of new diagnostic centres and nursing homes in smaller towns.

The advantage of an off-the-shelf scheme is that terms and conditions are standardised and loans can be sanctioned without delay. Banks can monitor it better by creating a vertical for the special schemes and smaller loans for Covid treatment can be sanctioned at all branches across the country.

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Meanwhile, two large loans to vaccine makers Serum Institute of India and Bharat Biotech, which had received in-principal approval from public sector banks are likely to get the advantage of the scheme. According to sources, Rs 500-crore fund and non-fund-based credit line have been extended to Serum Institute — makers of Covishield by Bank of Baroda. The loan is understood to have been sanctioned ahead of RBI’s measures, but the final approval came on Wednesday when the Rs 50,000-crore liquidity facility was announced for the healthcare sector. Bank of Baroda did not comment on the matter.
According to reports, SBI has extended a credit line to Bharat Biotech — makers of Covaxin. While the bank did not comment on the report, sources said the country’s largest lender is supporting many government initiatives to control Covid. A research report by the SBI said that the Rs 50,000-crore funding is 9% of India’s total health spending of Rs 6 lakh crore under private final consumption expenditure in FY20.

Bankers say that besides vaccine makers, pharma companies are expected to pick up another major chunk of this facility as the creation of fresh capacity would require major investment.

The finance minister had allotted Rs 35,000 crore in the Union Budget, which saw a 138% jump in allocation to health. Even this increased allocation is expected to be insufficient as the cost of vaccination is estimated to be twice the budgeted amount.

According to a report on healthcare by rating agency ICRA, the sector is expected to record a 20% growth in revenue during the current fiscal as against a 19% contraction in FY21. Hospitals, which had planned expansion, had to hold back last year as Covid resulted in many Indians postponing elective procedures. As a result, non-Covid hospitals saw low occupancy for several months last year. Occupancy is expected to bounce back to 60% in FY22 from 50% in FY21.



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