India plans sovereign guarantees for $26.7bn loans to support businesses.
Scheme offers 90% guarantee, modelled on Covid-era credit support.
Aims to protect sectors hit by West Asia supply disruptions.
India is preparing to deploy sovereign credit guarantees on loans worth $26.7bn to shield businesses from the economic fallout of the West Asia crisis, in a move that draws directly on the emergency lending support the government extended during the Covid-19 pandemic, two government sources told Reuters.
The scheme, still in planning, would see the government provide a 90% guarantee to banks on loans of up to one billion rupees per borrower — covering lenders against default in the event that businesses are unable to service their debt as supply disruptions and rising costs take hold. The guarantee period would last 4 years. The total cost to the government is estimated at between 170 billion and 180 billion rupees, or roughly $1.83 billion to $1.94 billion, the report said.
1 April 2026
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The sectors most immediately in focus are those directly exposed to supply chain disruptions flowing from the US-Israeli war with Iran — textile manufacturers and glass makers among them — though the scheme is designed to support small businesses more broadly as the economic effects of the crisis spread.
India faces a difficult combination of pressures. As the world's third-largest oil importer, it is acutely vulnerable to the energy price spike triggered by the near-closure of the Strait of Hormuz. At the same time, rising inflation and the risk of slower growth are beginning to weigh on an economy that had been performing strongly.
The structure of the proposed scheme closely mirrors the emergency credit guarantee programme India launched in 2020, when the government stepped in to ensure bank lending continued flowing to businesses, including those in travel and tourism, that had been devastated by the pandemic and needed support to resume operations and manage existing debt obligations.
In May 2020, the government announced the Emergency Credit Line Guarantee Scheme (ECLGS) as part of the Aatmanirbhar Bharat Abhiyaan, with the aim of supporting eligible micro, small and medium enterprises (MSMEs) and other qualifying businesses in meeting their operational liabilities and getting back on their feet following the disruption wrought by the Covid-19 pandemic.
The scheme cast a wide net, covering virtually all sectors of the economy, and offered a 100% guarantee to Member Lending Institutions (MLIs) on credit facilities extended by them to eligible borrowers under its provisions.
