Govt Steps in With ₹2.6 Trillion Credit Guarantee for Businesses, Airlines

The Union Cabinet today approved a scheme to provide credit guarantees worth ₹2.55 trillion, including ₹50 billion for airlines, to help businesses facing liquidity stress due to the conflict in West Asia, according to an official release.

Prices of crude oil and natural gas have risen following US and Israeli strikes on Iran. A fragile ceasefire is currently in place, but fuel prices remain high and supply remains constrained. The situation is unlikely to resolve quickly, even if both sides reach an agreement, as parts of the supply chain have been disrupted.

Airlines too have been feeling the pinch amid rising aviation fuel prices. The Federation of Indian Airlines has indicated that without urgent support, carriers may face operational constraints.

This is the fifth such credit guarantee scheme since the government introduced the first during the COVID-19 pandemic. 

The government has so far largely shielded domestic prices of aviation fuel, non-commercial vehicle fuels, and cooking gas.

Details of the scheme, as released by the Press Information Bureau:

• The scheme offers 100% guarantee coverage for micro, small and medium enterprises and 90% for non-micro, small and medium enterprises and airlines on incremental loans.
• It applies to borrowers with standard accounts and existing credit facilities as of 31 March 2026, and will remain open for loan sanctions until 31 March 2027.
• Eligible borrowers can access additional credit of up to 20% of their peak working capital utilisation in the January–March quarter of 2025–26, capped at ₹1 billion. Airlines can access up to 100% of working capital requirements, capped at ₹15 billion per borrower.
• Loans under the scheme will have a tenure of five years for most sectors, including a one-year moratorium. For airlines, the tenure will extend to seven years, with a two-year moratorium.
• The guarantee cover will remain valid for the duration of the loan.
• No guarantee fee will be charged under the scheme.

The government did not provide details on the fiscal impact of the moratorium under the scheme.