The government is introducing a ₹2 lakh crore credit guarantee scheme! Find out who will benefit from it.:To reduce the impact of the war in the Middle East on the Indian economy, the government has prepared a special credit guarantee scheme of Rs 2 lakh crore.

News Topical, Digital Desk : Amidst the ongoing war between Iran, the United States, and Israel, and rising tensions in the Middle East, the Indian government is working on a tailor-made aid package. Under this plan, the government has created a special credit guarantee scheme worth ₹2 lakh crore to mitigate the impact of the ongoing war on the Indian economy.

This new scheme is based on the Emergency Credit Line Guarantee Scheme (ECLGS) from the COVID era. The scheme, being developed by the Department of Financial Services, could be launched within the next 15 days.

Loan will be available on government guarantee without collateral

NDTV Profit reported, citing the Finance Ministry, that this scheme will provide loans to businesses. It will likely provide collateral-free credit with a government guarantee, especially for MSMEs. The source added that this will allow them to access funds easily and avoid a liquidity squeeze.

The government is taking this step at a time when export-related sectors are showing early signs of stress due to disruptions in global trade. Micro, small, and medium enterprises (MSMEs)—which are sensitive to interest rates and depend on stable cash flow—are expected to be the main beneficiaries of this scheme.

Government strategy

Under this ₹2 lakh crore government scheme, loans will be provided through banks at low interest rates. Its framework is largely similar to the one adopted during the COVID-19 pandemic to support businesses and prevent the rise in bad loans.

Officials said there is no immediate stress in the system, but the government is preparing a precautionary safety net to provide liquidity support if the situation worsens. They also said that even if geopolitical tensions ease, recovery in affected sectors will not be immediate as supply disruptions and uncertainty about demand are likely to persist.