India’s Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 to provide financial relief to businesses facing challenges due to the ongoing West Asia crisis. The new scheme aims to improve liquidity support for MSMEs, non MSMEs, and the airline sector by offering government backed credit guarantees on additional loans.
Under ECLGS 5.0, the government will provide guarantee coverage through the National Credit Guarantee Trustee Company Limited (NCGTC) to Member Lending Institutions such as banks and financial institutions. The scheme targets an additional credit flow of Rs 2,55,000 crore across sectors, including Rs 5,000 crore specifically allocated for airlines.
The scheme offers 100% guarantee coverage for MSMEs and 90% coverage for non MSMEs and airlines. This means banks will receive protection against defaults on eligible loans, encouraging faster lending during a period of economic uncertainty. The government has also removed the guarantee fee under the scheme, reducing the borrowing burden for businesses.
Eligible borrowers include MSMEs, non MSMEs with existing working capital limits, and scheduled passenger airlines with outstanding credit facilities as of March 31, 2026. However, only borrowers whose accounts are classified as standard will qualify under the scheme. This condition is aimed at supporting financially stable businesses facing temporary liquidity stress.
Businesses can avail additional credit support of up to 20% of their peak working capital utilisation during the fourth quarter of FY26, with a maximum cap of Rs 100 crore per borrower. For the airline sector, eligible companies can receive loans up to 100% of their outstanding amount, capped at Rs 1,500 crore per borrower, subject to specific conditions.
The loan tenure under ECLGS 5.0 has been structured to provide repayment flexibility. MSMEs and non MSMEs will receive loans with a total tenure of 5 years, including a 1 year moratorium period. Airlines will receive a longer repayment window of 7 years with a 2 year moratorium, considering the sector’s higher financial stress and operational costs.
The guarantee coverage period under the scheme will remain active for the entire duration of the loan. According to the government, all loans sanctioned from the date of the official guidelines issued by NCGTC until March 31, 2027, will be eligible under the scheme. This provides businesses with a defined window to access emergency credit support.
The government said ECLGS 5.0 is expected to help companies maintain operations, protect jobs, and ensure supply chain stability during the ongoing geopolitical tensions in West Asia. The scheme is also aimed at supporting domestic production and improving financial resilience across sectors by ensuring businesses have access to timely working capital support.
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