The borrowing cost of hospitals rated by Crisil is 10.5 to 11 per centCrisil Ratings said on Friday the Rs 50,000 crore liquidity window offered by Reserve Bank of India (RBI) to banks under priority sector lending to augment COVID-19 healthcare infrastructure will help raise treatment capacity, availability of medicines, and medical equipment. Hospitals can be among the biggest beneficiaries as incremental funding can potentially increase bed capacity in the country by 15 to 20 per cent, it said. Loans under the scheme for tenures up to three years are available to banks at repo rate till March 31, 2022. Such loans will also be classified under the priority sector.Consequently, banks are expected to extend these loans below current interest rates for companies engaged in healthcare activities. These include makers and suppliers of vaccines and drugs; hospitals; pathology labs; suppliers of oxygen; makers of emergency medical equipment; logistics firms; and Covid-19 patients.As many as 354 Crisil-rated companies with aggregate bank exposure of Rs 40,000 crore will be eligible for such loans. Though pharmaceutical firms account for 68 per cent of rated bank exposure, hospitals (24 per cent of rated exposure) are likely to avail majority of the funding available.The borrowing cost of hospitals rated by Crisil is 10.5 to 11 per cent and new loans taken for expansion under this RBI scheme could be 300 to 350 basis points cheaper, leading to substantial interest savings. Subodh Rai, Chief Ratings Officer at Crisil Ratings, said increased availability of funds at low cost will incentivise hospitals to augment beds, oxygen storage, ICUs, and critical medical equipment.”Even if half of the funding available is used to add hospital beds through brownfield expansion, it will mean five lakh incremental beds or 15 to 20 per cent of India’s current capacity.”In comparison, for entities in other health care related sectors such as pharmaceuticals, the capital requirements for enhancing production capacity of critical Covid-19 related drugs is not very high.Further pharmaceutical companies, owing to their strong credit profiles and availability of export credit facilities, have a relatively lower average cost of borrowing (8 to 8.5 per cent). Thus majority of pharmaceutical companies may not be keen to take on substantial debt under the RBI window to fund expansion.Also, only a few companies are manufacturing COVID-19 vaccines and these have availed of government advances/ grants for funding their requirement of Rs 5,000 crore. While incentives under the liquidity window are attractive, hospital firms will carefully evaluate decisions considering sustainability of demand and availability of critical resources like manpower and equipment.Anuj Sethi, Senior Director at Crisil Ratings, said augmenting healthcare infrastructure has challenges beyond capital requirements. Higher lead times for equipment and availability of qualified manpower are critical factors that can create bottlenecks.”This is especially true in the case of enhancing production of critical drugs such as Remdesivir where the outlay to increase production capacity of seven crore doses is only Rs 200 crore to 250 crore but lead times for ordering and installation of machines exceed a year, “Crisil said it is still early for healthcare players to evaluate their expansion plans. There will be more clarity once banks and lending institutions announce their policies for loans, and eligible firms decide on capital spends.