India is considering a proposal to guarantee as much as 3 trillion rupees (USD 39 billion) of loans to small businesses as part of a plan to restart Asia’s third-largest economy, which is reeling under the impact of a 40-day lockdown, people with knowledge of the matter said.

Under the proposal, small firms will be eligible to borrow an additional 20% of their credit limit, the people said, asking not to be identified as the discussions are private. The extra debt will be fully backed by Prime Minister Narendra Modi's administration, the people said. The government will set up a special fund to pay for any defaults, they said.