India approves $1.9 billion credit guarantee to support businesses hit by Middle East crisis

India's cabinet on Tuesday approved a new emergency credit guarantee programme worth 181 billion rupees ($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% guarantee coverage for small and medium enterprises and 90% 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 U.S.-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% of peak working capital used in the January-March quarter of fiscal 2026, capped at 1 billion rupees. Scheduled passenger airlines can borrow up to 100% of outstanding credit ‌facilities, capped at 15 billion rupees 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 5 billion rupees 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.

($1 = 95.2800 Indian rupees)