Covid-19 crisis: Banks make a beeline to offer loans to vaccine-makers, SII receives Rs 6,000-crore credit

This is a big opportunity for the banks to grow their businesses through lending money when the credit growth for banks has been static for more than a year

On May 12, the Reserve Bank of India (RBI) announced on-tap liquidity of Rs 50,000 crore with tenor up to three years at a 4 per cent repo rate for those lending to the healthcare sector to fight the Covid-19 pandemic. Soon after that, commercial banks are rushing to Covid-19 vaccine manufacturers in India to offer them funds, according to a Business Standard report.

This is a big opportunity for the banks to grow their businesses through lending money when the credit growth for banks has been static due to the pandemic for more than a year. The credit growth of commercial banks was 5.6 per cent year-on-year in the financial year 2020-21 as compared to 6.1 per cent in 2019-20.

As per sources from the banking industry, both public and private sector commercial banks have sanctioned credit of Rs 6,000 crore to Serum Institute of India (SII). Till now, SII has drawn Rs 1,200 crore from it. A banker told Business Standard that Rs 1,000 crore has been sanctioned to Bharat Biotech as well.

Read | The curious case of gaps between Covid-19 vaccine doses in India, UK

Banks are liable to lend 40 per cent of their total lending to the priority sector and the central government has categorised this on-top liquid facility under the priority sector.

While the healthcare sector is one of the best customers at this moment, the bankers are not sure if they need any more funds as they keep receiving funds from different people. For instance, last month, the Centre had given Rs 3,000 crore to SII and Rs 1,500 crore to Bharat Biotech.

“These are cash-rich companies, we do not know whether they will need the funds,” said the chief executive officer of a public sector bank to the publication.

“The RBI’s liquidity window is more for the healthcare sector than banks. Banks will benefit, but not to a great extent,” Siddharth Purohit, an analyst with broking firm SMC Global, told the publication. He added that retail loans like mortgages and automobiles have reduced this year, as compared to last year, due to the second wave of Covid-19.

Bank credit has contracted by Rs 89,000 crore in the financial year 2021-22, till April 23 as compared to Rs 97,445 crore contraction in the same period last year, according to the latest RBI data.