The government is planning to roll out an airline credit scheme worth Rs 5,000-crore under a broader relief package relief package to cushion the most impacted sectors from the ongoing US-Iran war, government sources told NDTV Profit. This will be under a broader Emergency Credit Line Guarantee Scheme (ECLGS) framework worth Rs 2.5 lakh crore which is being worked out for multiple affected sectors. The airlines may access the government-backed credit line via the ECLGS route.
As per sources, the scheme includes a Rs 1,000-crore worth credit cap likely per airline. It may run for five years with a possible extension. The government may offer up to 90% credit guarantee cover as part of the scheme. The airline relief scheme is part of the broader crisis support framework which is under consideration. Earlier this month, NDTV Profit had reported that the Finance Ministry is working on a pre-emptive support package to cushion sectors impacted by the Iran war.
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Top government sources had earlier told NDTV Profit that a Rs 2 lakh crore-plus credit scheme was under consideration. The scheme will provide loans to businesses, with plans likely to include collateral-free credit backed by government guarantees, especially for MSMEs, a top Finance Ministry source told NDTV Profit, adding that it would help them get easier access to funds and prevent a liquidity squeeze.
The developements by the government came amid early signs of stress in export-linked sectors due to global trade disruptions. Micro, Small and Medium Enterprises (MSMEs), which are sensitive to interest rates and depend on steady cash flows, are expected to be the key beneficiaries. The scheme is likely to offer collateral-free loans backed by government guarantees, similar to the structure adopted during the COVID pandemic to support businesses and contain a surge in bad loans.
Officials said there is no immediate systemic stress, but the government is preparing a precautionary cushion to ensure liquidity support if conditions deteriorate. They added that even if geopolitical tensions ease, recovery in affected sectors may not be immediate, with supply disruptions and demand uncertainty likely to persist. The COVID-era ECLGS supported millions of borrowers and played a key role in stabilising MSMEs. The new scheme is expected to follow a similar approach to navigate current conditions.
ALSO READ: MSME Loans To Face Higher Stress From Middle East Conflict: Crisil
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