Home >Industry >Banking >Ratings agencies laud RBI's liquidity measures for healthcare sector

Mumbai: Recent liquidity measures taken by the Reserve Bank of India (RBI) will go a long way in aiding the healthcare sector in India, raising treatment capacity and availability of medical equipment, ratings agencies said.

The central bank on Wednesday announced an on-tap liquidity window of 50,000 crore, which banks can utilize to provide fresh lending support to vaccine makers, importers of vaccines, covid-related drugs and priority medical devices, hospitals, pathology labs, manufacturers and suppliers of oxygen and ventilators, logistics firms and also to patients for treatment.

The second wave has left India gasping for breath as demand for medical-grade oxygen outstrips timely availability. The pandemic has also exposed gaps in the country’s rickety health infrastructure that has over 3.6 million active cases.

“While the RBI measures aim at easing the liquidity stress on the healthcare system, the pace of deployment of these funds towards enhancing capacities to cater to the high number of infections will be a key monitorable going forward," Icra Ltd said on Friday.

Nevertheless, given that banks are being incentivized for quick delivery of credit under the scheme through extension of priority sector classification to such lending up to 31 March 2022, the pace of disbursements of these loans might be faster than usual, it said.

“The RBI’s move to bolster liquidity is expected to provide immediate liquidity support to entities such as vaccine and oxygen manufacturers, and small-medium scale pharmaceutical companies looking at enhancing their capacities," said Mythri Macherla, assistant vice-president and sector head at Icra.

However, some industry players, Macherla said, may not prefer availing a loan under this structure, given the tenor cap of three years, as against a typical pay-back period of over five years.

Meanwhile, Crisil Ratings Ltd said in a report on Friday that as many as 354 companies with aggregate bank exposure of 40,000 crore will be eligible for such loans. Though pharmaceutical firms account for 68% of rated bank exposure, hospitals are likely to avail majority of the funding available, it said. The borrowing cost of hospitals rated by Crisil are 10.5-11.0%, and the new loans taken for expansion under this RBI scheme could be 300-350 basis points cheaper, leading to substantial interest savings.

“Increased availability of funds at low cost will incentivizehospitals to augment beds, oxygen storage, ICUs and critical medical equipment. Even if half of the funding available is used to add hospital beds through brownfield expansion, it will mean 5 lakh incremental beds, or 15-20% of India’s current capacity," said Subodh Rai, chief ratings officer, Crisil Ratings.

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