Rs 2.5 lakh cr shield for businesses: Govt plans fresh credit support for firms hit by West Asia crisis

India is working on a fresh credit guarantee programme aimed at shielding businesses from the economic ripple effects of the ongoing West Asia conflict, according to officials familiar with the discussions. The proposed scheme is designed to ensure that companies grappling with rising input costs and logistical disruptions continue to have access to affordable funding.

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The initiative, which could cover loans worth Rs 2–2.5 lakh crore, is expected to be announced within the next couple of weeks. Policymakers are moving swiftly as concerns mount over the indirect impact of geopolitical tensions on domestic industries, even though officials maintain that the financial system itself is not facing any immediate liquidity stress. Instead, they point to heightened uncertainty and caution among businesses and lenders.

The framework is likely to draw heavily from the Emergency Credit Line Guarantee Scheme (ECLGS), which was introduced during the Covid-19 pandemic to support micro, small and medium enterprises (MSMEs). Much like its predecessor, the new scheme is expected to offer collateral-free loans backed by a sovereign guarantee, making it easier for businesses to secure credit during a period of volatility.

Sources indicate that the government may extend guarantees of up to 90 % on these loans, thereby reducing the risk for lenders and encouraging them to maintain credit flow. The scheme is also expected to retain some of the borrower-friendly features seen under ECLGS, such as capped interest rates and a moratorium on principal repayment for an initial period.

While MSMEs are likely to remain a key focus, the coverage is expected to be broader this time, spanning multiple sectors affected by the crisis. The government’s move comes as part of a wider effort to cushion the economy from external shocks without triggering systemic stress.

On March 27, 2026, the Indian government announced a sharp Rs 10 per litre reduction in excise duty on petrol and diesel to combat soaring global oil prices. Effective immediately, this reduces special excise duty on petrol to Rs 3/litre and brings diesel duty to zero, aimed at protecting consumers from price hikes while incurring a significant revenue hit for the government