India’s cabinet on Tuesday approved a new emergency credit guarantee programme worth INR181 billion ($1.9 billion) to support businesses — particularly small firms — facing short-term liquidity stress linked to the Middle East crisis, the information minister said after a cabinet meeting.
The Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 will provide additional credit support to eligible borrowers, with the government offering 100 per cent guarantee coverage for small and medium enterprises and 90 per cent coverage for other firms and the airline sector, a government statement said.
The guarantees will be routed through the National Credit Guarantee Trustee Company Ltd.Businesses such as textile and glass makers have been hit by supply disruptions from the Middle East amid the US-Israeli war with Iran. At the same time, India — the world’s third-largest oil importer — faces risks of higher inflation and slower growth.
The scheme will cover additional loans extended by member lending institutions to borrowers with standard accounts and existing working capital limits or outstanding credit facilities as of March 31, 2026.
Under the plan, borrowers can raise up to 20 per cent of peak working capital used in the January-March quarter of fiscal 2026, capped at INR1 billion. Scheduled passenger airlines can borrow up to 100 per cent of outstanding credit facilities, capped at INR15 billion per borrower, subject to conditions.
Loans for businesses will run for five years, including a one-year moratorium, while airline loans will have a seven-year tenor with a two-year moratorium.
The scheme targets total additional credit flow of 255 billion rupees, including INR5 billion for airlines, and will apply to loans sanctioned through March 31, 2027, the statement said.The government said the measure is intended to help businesses maintain operations, protect jobs and sustain supply chains amid the conflict-related disruptions.
