India’s Finance minister Nirmala Sitharaman on Monday announced Rs 1.5 lakh-crore of additional credit for small businesses, more funds for the healthcare sector, loans to tourism agencies and guides, and waiver of visa fees as part of a credit-led package to support the Covid pandemic-hit economy.

In line with this, SBI Research analysis says in their report that the latest credit push for the pandemic-hit sectors and other relief supports will have an additional 60 bps impact on the fiscal deficit, and can offer an additional liquidity window of Rs 70,000 crore to banks.

The package, mostly made up of government guarantees to banks and microfinance institutions for loans they extend to the pandemic-hit sectors, totals up to Rs 6.29 lakh crore together with the previous such packages. According to an SBI Research analysis., assuming equal distribution of the new announcement of Rs 1.10 lakh crore, with 50 percent and 75 per cent guarantee cover and a risk weight of 100 percent, banks may have a capital relief of around Rs 7,500 crore that can further generate credit of around Rs 70,000 crore,

The fiscal impact of latest announcements and earlier is not linear as a substantial portion of the package is contingent liabilities. Ignoring these, the immediate impact will be slightly over Rs 1.23 lakh crore which will be around 0.6 percent of the GDP, SBI chief economist Soumya Kanti Ghosh said.

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