Government is coming up with a credit guarantee scheme of Rs 2 lakh crore! Know who will get the benefit?

Government Credit Scheme: Amidst the war between Iran-America and Israel and increasing tension in the Middle East, the Indian government is working on a pre-prepared aid package. Under this, to reduce the impact on the Indian economy due to the ongoing war, the government has prepared a special Credit Guarantee Scheme of Rs 2 lakh crore.

This new scheme is based on the ‘Emergency Credit Line Guarantee Scheme’ (ECLGS) of the Covid times. This scheme being prepared by the Financial Services Department can be started within the next 15 days.

Loan will be available on government guarantee without mortgage

Quoting the Finance Ministry, NDTV Profit reported that loans will be given to businesses under this scheme. There will probably be a provision for giving credit without any collateral with government guarantee, especially for MSMEs. The source further said that this will enable them to get funds easily and avoid liquidity squeeze.

The government is taking this step at a time when there are initial signs of stress in export-related sectors due to disruptions in global trade. Micro, small and medium enterprises (MSMEs)—which are sensitive to interest rates and dependent on stable cash flows—are expected to be the main beneficiaries of the scheme.

government strategy

Under this scheme of Rs 2 lakh crore of the government, loan facility will be available at low interest rates through banks. Its framework will be largely similar to the one adopted during the Corona epidemic to support businesses and prevent the increase in bad loans.

Officials said there is no immediate stress in the system, but the government is preparing a precautionary safeguard to provide liquidity support if the situation worsens. He also said that even if geopolitical tensions subside, improvement in the affected areas will not happen immediately as supply disruptions and uncertainty over demand are likely to persist.

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