The State Bank of India (SBI) on Friday introduced a collateral-free loan called 'Kavach Personal Loan' for its customers facing financial stress due to COVID treatment-related expenditures.

The state-run lender, under the scheme, is providing collateral-free personal loans of up to Rs 5 lakh at an 8.5% annual interest rate, aimed at helping customers meet medical expenses of self and family members for COVID-19 treatment.

The scheme will enable buyers "avail loans of up to 5 lakh at an effective interest rate of 8.5% per annum for 60 months which is inclusive of three months moratorium," SBI said in a statement.

"This unique product is being offered under the collateral-free personal loan category. Reimbursement of expenses already incurred for COVID related medical expenses shall also be provided under the scheme," the bank added.

The 'Kavach Personal Loan' will also be part of the COVID-19 loan book being created by banks in line with RBI's COVID relief measures, SBI further noted.

"We believe this new scheme will offer much-needed financial assistance to the people to manage the COVID treatment-related expenses without any hassle. With this strategic loan scheme, our aim is to provide access to monetary assistance - especially in this difficult situation for all those who unfortunately got affected by COVID," said Dinesh Khara, Chairman, SBI.