India to Introduce ₹2-2.5 Lakh Crore Credit Guarantee Scheme Amid West Asia Conflict

Original: India plans ₹2-2.5 lakh crore credit guarantee scheme amid West Asia conflict

The Economic Times•Apr 3, 20262 min

In a Nutshell

India is set to launch a credit guarantee scheme worth ₹2-2.5 lakh crore (approximately $240-300 billion USD) to support industries affected by the ongoing conflict in West Asia. The initiative aims to ease funding access for businesses facing increased costs, with a potential announcement in two weeks.

Key Points

01The new credit guarantee scheme could provide up to ₹2-2.5 lakh crore in support.
02The scheme aims to help businesses manage higher input and logistics costs due to the West Asia conflict.
03It is modeled after the Emergency Credit Line Guarantee Scheme (ECLGS) from the COVID-19 pandemic.
04Industry feedback is being solicited to assess the conflict's economic impact.
05The initiative is expected to offer 100% guaranteed collateral-free loans to eligible businesses.

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Full Summary

India is preparing to unveil a new credit guarantee scheme worth ₹2-2.5 lakh crore (approximately $240-300 billion USD) aimed at supporting industries impacted by the ongoing conflict in West Asia. This initiative is designed to ease funding access for companies facing rising input and logistics costs. The government is proactively assessing the economic fallout of the conflict and has reached out to industry leaders for real-time feedback on production challenges. The scheme is expected to mirror the Emergency Credit Line Guarantee Scheme (ECLGS) launched during the COVID-19 pandemic, which provided 100% guaranteed collateral-free loans to eligible businesses, including micro, small, and medium enterprises (MSMEs). Previous ECLGS efforts resulted in guarantees totaling ₹3.62 lakh crore, benefiting 11.9 million borrowers. While delinquencies have not yet surged, some sectors, particularly export-oriented units, are showing signs of stress, making this new scheme a timely intervention.

Key Figures

₹2-2.5 lakh crore

Potential total funding for the new credit guarantee scheme

₹3.62 lakh crore

Total guarantees issued under the previous ECLGS

11.9 million

Number of borrowers who benefited from ECLGS

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Why It Matters

The new scheme is expected to provide critical financial support to businesses, helping them manage increased costs and maintain operations during the economic uncertainty caused by the conflict.

Who is affected

Businesses, particularly MSMEs and export-oriented units, facing liquidity challenges.

What to know

Businesses should prepare to apply for the new scheme and provide feedback to the government on their specific challenges.

FAQ

The scheme aims to support industries affected by the West Asia conflict by easing funding access and managing increased costs.

It is modeled after the Emergency Credit Line Guarantee Scheme (ECLGS) from the COVID-19 pandemic, which provided collateral-free loans to businesses.

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