The Indian government has planned to launch sovereign credit guarantees on loans worth $26.6 billion (₹2 lakh to ₹2.5 lakh crore). This will support businesses hurt by the US-Iran conflict in the Middle East. As per the report, this scheme aims to help MSMEs and the export-linked sector, facing supply disruption, rising input costs, and weakening demand.
The scheme is modelled on the COVID-era Emergency Credit Line Guarantee Scheme (ECLGS). The plan is to offer collateral-free loans backed by government guarantees for four years with the aim of stopping bad loans from rising. The government may provide up to a 90% guarantee on loans of up to ₹1 billion. This will reduce risk for lenders if the borrower defaults. The scheme is expected to cost ₹170-180 billion.
This initiative by the government will ease liquidity stress, sustain MSMEs, and stabilise markets amid global uncertainty.
Sources:
Pay Bill
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