Govt Plans ₹2.5 Lakh Crore Loan Guarantee Scheme to Shield MSMEs Amid West Asia Crisis

The central government is preparing a fresh loan guarantee scheme for the affected regions in the wake of ongoing unrest in West Asia. The loan guarantee scheme will enable those companies experiencing difficulty obtaining credit due to disruptions in the supply chain and increase in the price of raw materials and logistics.

According to an official report, the government is considering offering guarantees of loans worth Rs 2 to 2.5 lakh crore through the loan guarantee scheme. It will operate in accordance with the Emergency Credit Guarantee Scheme (ECLGS) during the pandemic era. The Department of Financial Services is currently formulating it and is likely to announce it in the coming two weeks.

According to Amar Ujala sources, the purpose of this relief package is to ensure that sectors facing challenges due to supply chain disruptions do not face a cash crunch and can continue their operations. Under the scheme, these companies will receive loans backed by government guarantees.

Amar Ujala Sources said the scheme aims to provide companies with confidence so they can continue operating even in uncertain circumstances. The situation is not yet severe, but the government is preparing in advance to avoid further pressure on the economy. The government is contacting affected sectors to assess the impact of the West Asian conflict on their production.

Sources said the Iran war has directly impacted small, micro, and medium enterprises (MSMEs) and exports. Export-related sectors are under pressure due to disruptions in transportation and rising freight charges. The MSME sector, which is highly sensitive to interest rates and whose operations depend on stable cash flow, is also being severely affected. The government's new loan guarantee scheme will help small enterprises save their businesses and pay employees on time.

The Emergency Credit Guarantee Scheme, launched during the COVID-19 pandemic, helped millions of borrowers and played a crucial role in stabilizing the MSME sector, especially during the pandemic. Under the ECLGS, loan guarantees worth ₹3.62 lakh crore have been provided to 11.9 million beneficiaries so far, with the MSME sector being the largest beneficiary.

Despite global uncertainties and geopolitical tensions, India's export sector has shown strength. Exports are expected to register positive growth in 2025-26. According to a Commerce Ministry official, based on trends as of March 31, it is clear that despite numerous challenges, exports have not declined. In addition to tariffs, India's merchandise exports have maintained their momentum despite various economic challenges, such as the Ukraine war and West Asia tensions.