DPIIT Develops Framework for Credit Guarantee Scheme for Businesses

Government Considers ECLGS-Type Mechanism to Support Businesses Amid West Asia Crisis

The Indian government is considering rolling out a credit guarantee cover and collateral-free lending mechanism for businesses, similar to the Emergency Credit Line Guarantee Scheme (ECLGS), in response to the ongoing West Asia crisis. This development was announced by Ateesh Kumar Singh, Additional Secretary in the Department for Promotion of Industry and Internal Trade (DPIIT), at the CII MSME Leadership Summit 2026 in New Delhi on Thursday.

In 2020, the government launched the ECLGS as part of the Aatmanirbhar Bharat Abhiyaan to support eligible Micro, Small and Medium Enterprises (MSMEs) and other eligible business enterprises. The scheme was aimed at helping these businesses meet their operational liabilities and restart their operations in the context of the disruption caused by the COVID-19 pandemic.

The proposed new mechanism, which is still in the works, is expected to include features such as collateral-free lending and a credit guarantee cover. Additionally, restructuring and moratorium may be part of the credit facility. Singh also mentioned that the government is exploring ways to provide relief on raw material procurement through the NSIC programme and regulatory forbearance from the RBI and other regulators.

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The ECLGS was a successful initiative that covered almost all sectors of the economy. Under the scheme, a 100 per cent guarantee was provided to Member Lending Institutions (MLIs) in respect of the credit facility extended by them to eligible borrowers. The scheme's structure allowed for easy access to credit, as lenders offered pre-approved loans based on the borrower's existing credit outstanding. There was no fresh appraisal undertaken by lenders, and additional credit was sanctioned over and above the credit facilities already assessed.

The government is now seeking feedback from the industry on the above measures being examined.