The central government is set to launch a Rs 2.5-lakh-crore credit guarantee scheme in the coming days to support sectors affected by the West Asian crisis, officials said.
Expansion of ECGLS Framework
The new scheme builds on the Emergency Credit Line Guarantee Scheme (ECGLS) introduced in 2020 to aid MSMEs during the Covid-19 pandemic.
90 Percent Credit Guarantee
Under the plan, businesses availing loans through the National Credit Guarantee Trustee Company (NCGTC) are expected to receive a 90 percent credit guarantee. If a borrower defaults, the government will cover the lender’s loss.
Coverage and Duration
The scheme is likely to remain valid for four years, providing around Rs 100 crore coverage to various sectors and sub-sectors. Cabinet approval is anticipated soon.
Targeted Sector Support
The initiative aims to help multiple sectors facing liquidity stress, including MSMEs and aviation. The aviation sector, in particular, needs focused support due to disruptions caused by the Iran crisis.
Affordable Credit Terms
In line with the earlier ECGLS, borrowers may not need additional collateral, with interest rates capped at 9.25% for banks and 14% for NBFCs. A one-year moratorium on principal repayment will likely be offered, though interest will remain payable.
Impact of Previous ECGLS
The ECGLS previously issued around 1.19 crore guarantees, with 1.13 crore benefiting MSMEs. Officials noted that the new scheme will expand coverage and limits to help a broader range of sectors access guaranteed credit efficiently.
