₹2.5 Lakh Crore Credit Guarantee Scheme Planned to Support MSMEs Amid West Asia Crisis

The government is considering a ₹2.5 lakh crore credit guarantee scheme aimed at supporting businesses, particularly MSMEs, affected by the ongoing West Asia crisis. Under the proposed plan, lenders would receive a 90% credit guarantee on loans of up to ₹100 crore in case of borrower defaults linked to disruptions caused by the US-Iran conflict. The guarantee would be provided through the National Credit Guarantee Trustee Company (NCGTC), a wholly owned government entity, with an estimated fiscal outlay of ₹17,000–₹18,000 crore.

The scheme draws inspiration from the Emergency Credit Line Guarantee Scheme (ECLGS) launched in May 2020 under the Aatmanirbhar Bharat Abhiyaan during the Covid-19 pandemic. That initiative, which offered 100% credit guarantees to lenders, played a key role in helping businesses maintain liquidity, meet operational expenses, and revive activities across sectors. Its structure enabled quick loan disbursal through pre-approved credit lines, capped interest rates, and zero processing or prepayment charges, ensuring ease of access for borrowers.

In parallel, the government has introduced several measures to cushion the economic impact of rising global crude prices triggered by geopolitical tensions. These include significant cuts in excise duty on petrol and diesel, export duties on diesel and aviation turbine fuel, and customs duty exemptions on critical petrochemical imports. With crude prices surging nearly 50% since late February amid escalating conflict, these steps aim to stabilize supply chains, reduce inflationary pressures, and provide relief to both businesses and consumers.

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