Commercial banks and financial institutions in Karnataka have cut down the lending rates for the medical entrepreneurs planning to set up nursing homes or expanding their existing facilities. The current interest rates range from 11.25 per cent to 13 per cent as against 12 to 16 per cent a few months ago.

There is no shortage of clients either. According to informed sources, around 3,000 nursing homes in Karnataka including 500 in Bangalore, have received financing to set up healthcare facilities or purchase of medical equipment. This sector makes up almost 25 per cent of all the funding provided by the banks.

Growing healthcare needs and high credit-worthiness of healthcare establishments have joined hands to push the lending rates down. Besides, the borrowers are acutely conscious that defaulting could damage their credibility among their patients, according to RV Shastri, chairman and managing director, Canara Bank.

Another factor is that branch heads of various banks can now adjust the prime lending rate, depending on the project viability and financial track record of the borrower, said ABS Shetty, assistant general manager, credit department, Vijaya Bank.

The freedom to offer flexible lending options began with the constitution of the Narasimhan Committee by the government of India in the early `90s where a set of norms allowed the banking sector fix their lending rates. "The onset of liberalisation around the same time led to negotiable and competitive interest rates on par with international standards," said M.S Kumaraswamy, branch manager, Karnataka Bank, Wilson Garden, Bangalore.

Besides banks, medical entrepreneurs also have the options of approaching financial institutions like the Karnataka State Financial Corporation (KSFC) or a consortium of lenders like IDBI, IFCI and ICICI.

"Though rates have indeed fallen considerably over the years, they do not affect the bottom lines of the banks. We are flush with funds and the pressure is mounting on us, especially from the healthcare sector, to cut the interest rates," Shastri pointed out.

"Hospitals are not a profit-enterprise. It was difficult to get finances in the pre-liberalised era. Major term lending began when hospitals were recognised as an industry by a consortium of lenders- IDBI, IFCI and ICICI,'' informed M V Shivaramamurthy, company secretary, Bangalore Hospital which is among the first corporate hospitals to receive loans from the commercial banks in 1986 and the financial institutions like the IDBI, IFCI and ICICI in 1987.