The Finance Ministry is working on a pre-emptive support package to cushion sectors impacted by ongoing Iran conflicts, with a Rs 2 lakh crore-plus credit scheme under consideration, top government sources said.
The new scheme, modelled on the Covid-era Emergency Credit Line Guarantee Scheme (ECLGS), is being finalised by the Department of Financial Services and could be rolled out within the next 15 days.
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 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 further.
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 earlier ECLGS supported millions of borrowers and played a role in stabilising MSMEs during the pandemic, and the new scheme is expected to follow a similar approach to navigate current conditions.
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