The Centre may roll out a ₹2.5 lakh crore credit guarantee scheme to help businesses facing liquidity pressures due to the ongoing West Asia crisis.
The proposed scheme expands the pandemic-era Emergency Credit Line Guarantee Scheme, offering up to 90% sovereign guarantee on loans via NCGTC.
Aviation, MSMEs, and other vulnerable sectors may benefit from easier access to credit, with policymakers considering a broader scope and higher coverage limit.
The Union government will possibly roll out a ₹2.5 lakh crore credit guarantee scheme in the coming days with the aim of providing support to all sectors affected by the West Asian crisis, Moneycontrol reported, citing government officials. The scheme will be an expansion of the Emergency Credit Line Guarantee Scheme (ECLGS) framework, originally launched to provide relief for micro, medium and small enterprises (MSMEs) during the Covid-19 pandemic.
The extended scheme is expected to provide a 90% credit guarantee for loans from the National Credit Guarantee Trustee Company (NCGTC) availed by businesses. The source added that the proposal for the sceheme has been sent to the cabinet and will be approved in the upcoming weeks.
1 April 2026
Get the latest issue of Outlook Business
The scheme is such that, if the borrower defaults, the government will bear the cost and cover the loss for the lender. The validity of the scheme is expected to be for four years, with ₹100 crore cover given to different sectors and sub-sectors, the report said, citing sources.
"The idea is to extend support across sectors, including aviation, MSMEs and even other businesses that are currently facing liquidity pressures. The aviation sector, in particular, requires targeted support at this stage, given the impact of the ongoing Iran crisis and the resulting disruptions in routes, costs and operations,” the report said, citing one of the sources.
Earlier, the scheme did not require any additional security or collateral for borrowers to avail these loans. The report stated that, to keep credit affordable, interest rates were capped at 9.25% for banks and 14% for non-banking finance companies (NBFCs).
The scheme also offered a one-year moratorium on principal repayment, although interest was payable during this period. Nearly 1.19 crore guarantees were issued through the scheme, with roughly 1.13 crore of them issued to MSMEs.
The report cited an official as saying that the ECLGS scheme has been a success in providing support for businesses during periods of stress; however, the current economic situation requires a significant scaling up. He added that policymakers are assessing ways to enhance both the scope and overall limit of the scheme so that the credit scheme is accessible to a broader set of sectors and enterprises.
