Government to Launch ₹2.5-Lakh-Crore Credit Guarantee Scheme Amid West Asian Crisis Concerns

Government to Roll Out Rs 2.5-Lakh-Crore Credit Guarantee Scheme

The central government is planning to launch a Rs 2.5-lakh-crore credit guarantee scheme in the coming days to support sectors hit by the West Asian crisis. This move is expected to be an expansion of the Emergency Credit Line Guarantee Scheme (ECGLS) framework, which was originally launched to support Micro, Small, and Medium Enterprises (MSMEs) during the Covid-19 pandemic in 2020.

The new scheme will provide a 90 percent credit guarantee for loans from the National Credit Guarantee Trustee Company (NCGTC) availed by businesses. This means that if a borrower defaults, the government will cover the loss for the lender. The scheme is expected to be valid for four years and will cover different sectors and sub-sectors, with approximately Rs 100 crores allocated for each.

The scheme aims to extend support to sectors including aviation, MSMEs, and other businesses facing liquidity pressures. The aviation sector, in particular, requires targeted support due to the impact of the ongoing Iran crisis and resulting disruptions in routes, costs, and operations. The central government is looking to provide support to all sectors affected by the crisis.

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In comparison to the earlier ECGLS scheme, the new scheme is expected to have a larger scope and overall limit. The earlier scheme provided 1.19 crore guarantees, with 1.13 crore of those guarantees issued to MSME units. The scheme had interest rates capped at 9.25% for banks and 14% for Non-Banking Financial Companies (NBFCs), with a one-year moratorium on principal repayment.

The government officials stated that the ECGLS scheme has been effective in supporting businesses during stress periods, but the current situation requires a significant scale-up. The officials are looking to enhance both the scope and the overall limit of the scheme to support a larger set of sectors and enterprises.