MSMEs hail RBI’s Rs 50,000 crore liquidity support to strengthen Covid infrastructure, supplies in time

Credit and Finance for MSMEs: MSMEs in the medical device industry have welcomed the Reserve Bank of India’s decision to allow banks to provide Rs 50,000 priority lending to entities in the healthcare sector to ramp up Covid-related medical infrastructure and services. RBI Governor Shaktikanta Das on Wednesday announced “an on-tap liquidity window of Rs 50,000 crore with tenors of up to three years at the repo rate is being opened till March 31, 2022,” for banks to lend to vaccine manufactures, importers, and suppliers of vaccines and priority medical devices, hospitals and dispensaries, pathology labs, manufactures and suppliers of oxygen and ventilators, etc.

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“Easier access to funds will help manufacturers and importers to finance ramping up of supplies to augment supply chain of critically needed medical devices,” Rajiv Nath, Managing Director, Hindustan Syringes & Medical Device, and Forum Coordinator, Association of Indian Medical Device Industry (AiMeD) told Financial Express Online. AiMeD is an umbrella association of Indian manufacturers of medical devices with over 500 members, nearly 95 per cent of which are MSMEs. It also has over 200 associate members representing the interest of more than 1,200 medical device manufacturers.

The surge in Covid cases since March has put India’s healthcare system under severe strain with hospitals running over and above their actual capacity and even running out of critical lifesaving medical oxygen, ventilators, ICU beds, etc. The piling up of cases has triggered a never-seen-before healthcare crisis in the country and consequently leading to an increase in the number of deaths. The World Health Organization on Wednesday said that India accounted for 46 per cent of the new Covid-19 cases recorded worldwide last week and one in four deaths. The latest announcement by Das, hence, has been the need of the hour.

Also read: RBI’s relief measures for MSMEs: 4 key takeaways from Shaktikanta Das speech; experts opine mixed bag

“Overall health budget in India for 2021-22 was set at Rs 2.23 lakh crores and an additional credit of Rs 50,000 crores is nearly 23 per cent of the government expenditure. The same would be available for all stakeholders such as hospitals, nursing homes, vaccine manufacturers, pathology labs to ramp up the infrastructure and supplies. Banks will give cheap loans to import medical equipments, vaccine supplies, oxygen concentrators, and mobile oxygen plants, etc., thus enabling smaller micro-level players to step in the process which seemed unaffordable for them earlier. MSMEs and small entities earlier used to struggle to secure credit from banks as banks prefer organized and big players, but this would tip the scale in their favor as it is easy and cheap access to fresh credit,” Jyoti Prakash Gadia, Managing Partner, Resurgent India told Financial Express Online.

Currently, a good share of demand for healthcare equipment is being met by imports from China. Credit support is likely to reduce dependency on China. Also, health-tech startups will be able to take advantage of this new liquidity to scale up their operations. Gurugram-based Sunil Singh who runs UnivLabs: manufacturer of indigenous endoscope surgical towers said that the pandemic has exposed India’s limited capability in medical device manufacturing which is a highly capital-intensive industry with high regulatory scrutiny.

“The current announcement of RBI will give renewed impetus in self-reliance. Considering the scale of our country and population, we shall localize the design and manufacture of most of the medical devices. Our stress should not be only to build innovative devices but all devices for which India depends on imports,” Singh told Financial Express Online.

RBI said that loans under the new liquidity facility will be classified under the priority sector till repayment or maturity, whichever is earlier. Banks may deliver these loans to borrowers directly or through intermediary financial entities regulated by the RBI. Das said that banks are expected to create a Covid loan book under the scheme. “By way of an additional incentive, such banks will be eligible to park their surplus liquidity up to the size of the Covid loan book with the RBI under the reverse repo window at a rate which is 25 bps lower than the repo rate or, termed in a different way, 40 bps higher than the reverse repo rate.”