India plans sovereign guarantees on loans to businesses hit by Iran war, sources say

India plans to roll out sovereign credit guarantees on loans worth $26.7 billion, aimed at supporting businesses, particularly small firms, affected by the Middle East crisis, two government sources said. Businesses, such as textile and glass makers, have been hit by disruptions to supply from the Middle East due to the U.S.-Israeli war with Iran. At the same time India, the world’s third-largest oil importer, also faces the risk of rising inflation and slower growth.

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The government is planning sovereign guarantees for four years to banks that lend to businesses, similar to those provided during the deadly COVID-19 pandemic, both the sources said. This would cost the government about 170 billion to 180 billion rupees ($1.83 billion to $1.94 billion), they said.


India is planning to provide a guarantee of about 90% on loans up to 1 billion rupees ($10.75 million) to lenders in case borrowers default in the aftermath of the crisis in the Middle East, both the sources said.

In 2020, India offered credit guarantees to support bank lending to businesses, including travel and tourism firms hit hardest by the COVID-19 pandemic, to help them resume operations and pay their debts.