India expands guarantees on business loans to $60.7 billion

India has extended a federal guarantee on bank loans to health and tourism services to cushion them from the ravaging impact of the pandemic and also waived visa fees for 500,000 foreign tourists.

India’s finance minister said on Monday that the government, as part of its efforts to revive the pandemic-hit economy, would expand federal guarantees on loans to businesses to Rs4.5 trillion ($60.7 billion) from an earlier limit of Rs3.0 trillion rupees.

Finance Minister Nirmala Sitharaman said the government would provide a guarantee of Rs1.1 trillion on loans to the health sector and medical infrastructure to enable them to raise loans at a lower interest rate of 8-8.25 per cent a year.

The Emergency Credit Line Guarantee Scheme, launched last year, has helped cash-starved small businesses raise funds during the Covid-19 lockdown for working capital and to meet their orders.

The government will extend benefits from the free foodgrain programme for poor people, launched last year, till November that will cost Rs938.7 billion, bringing the total cost of the programme to more than Rs2.27 trillion, she said.

Sitharaman said that under the new loan guarantee scheme for Covid-affected sectors, working capital or personal loans will be provided to people in the tourism sector to discharge liabilities and restart businesses impacted due to Covid-19.

Loans will be provided to registered tourist guides and other travel and tourism stakeholders with 100 per cent guarantee. Loans of up to Rs1 trillion would be available with guarantee to tourist guides licenced at regional or state level. A total of 10,700 regional level tourist guides recognised by the Minister of Tourism and state governments would benefit from the scheme.

Further, loans with an upper limit of Rs1.0 million would be available with 100 per cent guarantee to travel and tourism stakeholders such as travel agencies.

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 ($54.8 billion) are offered.

The enhanced programme will guarantee loans worth Rs20 million to hospitals and clinics to set up on-site oxygen generation plants.

Interest rates will be capped at 7.5 per cent. Small companies can borrow an additional 30 per cent of their credit limit, up from 20 per cent announced last year. Some eligible borrowers can extend the tenor of their loans by a year.

So far, about Rs2.5 trillion have been disbursed, Sunil Mehta, chief executive of the Indian Banks' Association, said at a briefing.

"These are more proactive steps that are being taken to offer mitigation to the hardship that the sector might experience," Dinesh Khara, chairman of State Bank of India, said at a media briefing.

— issacjohn@khaleejtimes.com