India Extends $41 Billion Loan-Guarantee Offer to Airlines
An Air India Ltd. aircraft stand on the tarmac at the Indira Gandhi International Airport in New Delhi. (Photographer: T. Narayan/Bloomberg)

India Extends $41 Billion Loan-Guarantee Offer to Airlines

India expanded an emergency credit program to airlines and hospitals to cushion them from the impact of a wave of coronavirus infections and deaths.

The loans, which were previously intended for specific sectors such as small borrowers, can be availed until Sept. 30 or until total guarantees worth 3 trillion rupees ($41 billion) are offered, the Finance Ministry said in a statement Sunday. So far, about 2.5 trillion rupees have been disbursed, Sunil Mehta, chief executive of the Indian Banks’ Association, said at a briefing.

Prime Minister Narendra Modi’s administration is turning focus to protecting the economy as a devastating surge of Covid-19 infections ebb. While he eschewed a national lockdown in favor of localized 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.

“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,” said Anil Gupta, vice president for financial sector ratings at ICRA Ltd. “The government will not be burdened with additional cost because of the second wave and this will also improve the utilization of overall funding pool available under the plan.”

The overall size of the program could be expanded pending cabinet approval, according to people with knowledge of the matter. Some aspects of a central bank borrowing window for Covid-affected individuals and medical sectors may also be included under the government guarantee program, they said, asking not to be identified citing rules. Calls to a spokesman at the Ministry of Finance were unanswered outside of business hours.

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%.

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

“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 on Sunday. 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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