Reserve Bank of India: Rs 50K crore liquidity facility from RBI can increase hospital bed capacity by 20%: Crisil

The Reserve Bank’s Rs 50,000 crore liquidity window may help increase hospital bed capacity by up to 20% as credit will be available at cheaper costs, the credit rating agency said on Friday. credit.

The window opened to banks as part of priority sector loans to increase COVID-19 health care infrastructure will help increase processing capacity and the availability of drugs and medical equipment, he said.

It can be noted that large parts of the country’s health infrastructure have been overwhelmed, exposing capacity gaps, as the country battles the second wave of the pandemic where the number of officially reported people has crossed the 4 lakh mark. and deaths hover around 3,500 per day. . On Wednesday, the RBI created the facility by offering numerous incentives to banks.

“Hospitals could be among the biggest beneficiaries as the additional funding can potentially increase bed capacity in the country by 15 to 20 percent,” said a rating agency note.

Banks are expected to lend for health activities below current lending rates, thanks to the program, which implies that loans will be available to banks at the repo rate until March 2022 which are to be used for on-lending and also obtain a classification of loans to the priority sector, Crisil said. .

According to RBI guidelines, loans can be made to vaccine and drug manufacturers and suppliers, hospitals, pathology laboratories, oxygen suppliers, emergency medical equipment manufacturers, logistics companies and COVID-19 patients, the agency said.

The agency said 354 companies it assesses, with a total bank exposure of Rs 40,000 crore, would be eligible for such loans. Pharmaceuticals make up 68% of rated bank exposure, but hospitals (24% of rated exposure) are likely to benefit from the majority of available funding, he said.

Right now, hospitals pay up to 11 percent interest on their loans, and new loans under new programs will be up to 3.50 percent cheaper, he said. .

“An increased availability of low-cost funds will prompt hospitals to increase beds, oxygen storage, intensive care units and critical medical equipment,” its ratings manager Subodh Rai said.

If half of the Rs 50,000 crore window is used to increase hospital beds, the number of beds will increase to 15-20% of current capacity, he added.

Companies in other sectors related to health care such as pharmaceuticals, the capital requirements to improve the production capacity of critical drugs related to COVID-19 are not very high, he said, adding that pharmaceutical players borrow money at much lower costs of 8-8.5% and will not be willing to avail the credit under it.

In addition, companies manufacturing vaccines have already been supported by the government for their financing needs of Rs 5,000 crore.

However, while the incentives under the liquidity window are attractive, hospital companies would carefully evaluate decisions taking into account the sustainability of demand and the availability of critical resources such as manpower and equipment, the agency said.

“Increasing health care infrastructure presents challenges that go beyond capital requirements. Longer lead times for equipment and the availability of a skilled workforce are critical factors that can create bottlenecks, ”said senior manager Anuj Sethi.

He cited the case of Remdesivir injection, pointing out that the expense to increase production capacity by 7 crore doses is only Rs 200-250 crore, but the time to order and install the machines exceeds a year.

It is still too early for health players to assess their expansion plans. There will be more clarity once banks and lending institutions announce their lending policies and eligible businesses decide on capital spending, the agency noted.