Indian President Ram Nath Kovind

India extends $41bn emergency loan-guarantee offers to airlines, hospitals

*The Indian Government extends emergency credit programme to key sectors of the economy until September 30 in a move to protect the country’s economy amid a devastating surge of COVID-19 infections

Isola Moses | ConsumerConnect

As the country battles to reduce the current high infection and death rates resulting from a new wave of the devastating COVID-19 pandemic, India has expanded an emergency credit programme to airlines and hospitals to cushion them from the damaging impacts of the disease.

The Finance Ministry of the one of the most populous countries on earth in a statement Sunday, May 30 said the loans, which were previously intended for specific sectors, such as small borrowers, can be availed until September 30, or until total guarantees worth three trillion Rupees ($41 billion) are offered.

About 2.5 trillion Rupees have been disbursed, Sunil Mehta, Chief Executive of the Indian Banks’ Association, said at a briefing.

It was gathered Prime Minister Narendra Modi’s administration is turning focus to protecting the economy as a devastating surge of COVID-19 infections ebbs, agency report stated.

While he eschewed a national lockdown in favour of localised mobility curbs, demand is still weak following a recession last year and as the recent wave of infections killed more than 150,000 people amid a severe shortage of basic medical facilities such as hospital beds and oxygen.

Anil Gupta, Vice President for financial sector ratings at ICRA Limited was quoted to have said: “With the second wave and incremental stress on debt servicing of the borrowers, relief measures under the loan guarantee scheme will support liquidity position of the borrowers,”

“The government will not be burdened with additional cost because of the second wave and this will also improve the utilisation of overall funding pool available under the plan.”

Close government sources also indicated that the overall size of the programme could be expanded pending cabinet approval.

Some aspects of a central bank borrowing window for Covid-affected individuals and medical sectors may also be included under the government guarantee programme, the unidentified sources noted.

The enhanced program will guarantee loans worth 20 million rupees to hospitals and clinics to set up on-site oxygen generation plants. Interest rates will be capped at 7.5 percent.

Small companies can borrow an additional 30 percent of their credit limit, up from 20 percent announced 2020. Some eligible borrowers can extend the tenor of their loans by a year, report stated.

Dinesh Khara, Chairman of State Bank of India, said at a media briefing Sunday as well said: “These are more proactive steps that are being taken to offer mitigation to the hardship that the sector might experience.”

It’s too early for any bank to say with “definitive certainty” the impact the second wave of the pandemic has had on small and medium businesses, he said.

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