The Finance Minister of India has recently requested all parties involved to expedite the conclusion of the Rs 50,000 crore Loan Guarantee Scheme for Covid-Affected Sectors (LGSCAS) in non-metros. This move is preemptive and aims to provide a robust response mechanism if a third wave of Covid-19 occurs. LGSCAS is a pioneering project specifically designed to fortify the medical infrastructure throughout the country, with special emphasis on underserved regions.
About the LGSCAS
The Indian government gave the green light to the LGSCAS scheme in June 2021. The initiative entails bank-provided loans destined for the construction of healthcare facilities in non-metro areas and small towns. These loans come with an upper cap on the interest rate set at 7.95%.
Guarantee Coverage under LGSCAS
Under this scheme, LGSCAS pledges a 50% guarantee for brownfield projects and a 75% guarantee for greenfield projects on loans sanctioned up to Rs. 100 crore. This applies for initiatives carried out in urban or rural areas excluding the top 8 Metropolitan Tier 1 cities, also known as Class X cities. For ambitious districts, the guarantee cover for both types of projects is 75%. The duration of the guarantee extends for three years.
For clarity, it’s worth noting that a greenfield project refers to an entirely new project which is built from scratch, whereas a brownfield project is one that has previously been developed by others and is being expanded upon or improved.
Expected Benefits of LGSCAS
The LGSCAS scheme is expected to have numerous tangible benefits for the nation. The most evident of these is the boost to healthcare infrastructure in underserved areas. In addition to improving healthcare access, the scheme will create more employment opportunities, contributing to India’s economic growth. Furthermore, LGSCAS aims to alleviate credit risk, specifically in construction, and facilitate bank credit at lower interest rates.
Eligibility Criteria
The scheme is applicable to all loans that meet the necessary criteria and are sanctioned up until the 31st of March, 2022. Alternatively, the scheme will apply up until a total amount of Rs. 50,000 crore is sanctioned, whichever happens first.
Through the implementation and successful execution of the LGSCAS, India aims to fortify its healthcare system, particularly in regions where access to medical services has been historically underserved. This move shows responsible foresight from the government, given the ongoing threat of Covid-19 and potential future waves of the virus.