New Delhi, April 7, 2026: The Indian government is planning a ₹2.5 lakh crore credit guarantee scheme to support businesses hit by the West Asia crisis, especially smaller firms facing supply-chain disruption and higher trade costs. The plan would cover loans for about four years, with the government backing 90% of loans up to ₹100 crore through a sovereign guarantee structure. The guarantee would be routed through the National Credit Guarantee Trustee Company (NCGTC), a government-owned entity.
About the scheme
The credit guarantee scheme is designed as a credit backstop, not a direct cash payout. In practical terms, the government would stand behind bank loans so lenders can continue extending working capital to stressed businesses even if the borrower’s repayment capacity is hit by war-related disruption. The move is aimed mainly at small firms affected by supply shocks from the Middle East crisis, while Business Standard reported the estimated fiscal support requirement at about ₹17,000 crore to ₹18,000 crore.
The policy logic is straightforward: when lenders see less risk, credit flows more easily. That matters in a shock like this because India is exposed to imported energy costs, logistics delays, and trade uncertainty. The affected sectors include textiles and glass, and India, as the world’s third-largest oil importer, faces a risk of higher inflation and slower growth.
Sources said the scheme was a huge success during the COVID-19 pandemic and helped many businesses across various sectors to stay active.
Main beneficiaries
The first beneficiaries are MSMEs and other smaller businesses that have been squeezed by war-related disruptions in West Asia. Export-oriented sectors, Industries hit by supply chain disruption, Specific sectors mentioned in reports, Aviation, Textiles, Glass, and other manufacturing & trade sectors. These are the kinds of businesses that usually have thin cash buffers and are most vulnerable when freight, insurance, or input costs rise suddenly.
The government has already been using guarantee-based tools for smaller enterprises. A Parliamentary Committee release on MSMEs said the existing CGTMSE credit guarantee scheme had extended 1.35 crore guarantees worth ₹12.39 lakh crore up to 31 December 2025, with the guarantee ceiling raised to ₹10 crore per borrower from April 2025. That shows the broader policy direction: use guarantees to keep formal credit open during stress.
Eligibility
Based on media reporting, the likely eligible pool is MSMEs and other businesses directly affected by West Asia supply disruption, with emphasis on firms under cash-flow pressure rather than large balance-sheet borrowers. The loans would be guaranteed for up to ₹100 crore per borrower, and Business Standard said the cover would sit at about 90% of the loan amount.
The Union Budget 2026-27 already pointed to more targeted guarantee support for MSMEs. In the Budget speech, the finance minister said: “introduce a credit guarantee support mechanism through CGTMSE” for invoice discounting on the TReDS platform. That is not the same scheme, but it confirms that credit guarantees remain a live policy instrument for MSME liquidity.
How to apply
The final application process for this specific credit guarantee scheme has not been officially announced. However, borrowers generally go through their bank or other lending institution, and the lender files the guarantee application with the guarantee agency. CGTMSE’s official FAQ says entrepreneurs must approach banks or financial institutions that are already registered as member lending institutions, and that applications are filed by the lender, not directly by the borrower.
The lender logs in to the portal and applies for guarantee cover after sanctioning the credit, with approval following the application and the guarantee becoming live after the fee is paid. If the new war-relief scheme follows the same administrative pattern, businesses should expect the loan application to begin with their bank, not with a standalone public portal. That is an inference from the existing guarantee framework, not a confirmed feature of the new proposal.
Why is this scheme needed
Because of the US-Israel-Iran war, businesses are being hit by disruptions in supply from the region, while India also faces the risk of higher inflation and slower growth. In parallel, the government has already approved a separate official measure called RELIEF under the Export Promotion Mission for exporters facing freight escalation, higher insurance premiums, and war-related risks in the Gulf corridor. The Commerce Ministry said this was a “time-bound and targeted intervention”, and added that the government’s approval reflected its “commitment to respond swiftly” to external disruptions.
That matters because war shocks do not stay confined to one sector, they move through shipping, insurance, fuel, inventory, and receivables. The purpose of a guarantee scheme is to stop that shock from turning into a wave of loan stress, delayed payments, and avoidable layoffs. In simple terms, the government is trying to keep otherwise viable businesses alive until the disruption eases.
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