The Union Cabinet, chaired by Prime Minister Narendra Modi, on Tuesday, 5 May, approved the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 aimed at providing additional credit support to businesses facing liquidity pressures linked to the ongoing West Asia situation.
According to the official government release, the scheme will provide credit guarantee coverage through the National Credit Guarantee Trustee Company Limited (NCGTC) to Member Lending Institutions (MLIs) extending additional credit support to eligible borrowers.
The government said the scheme targets an additional credit flow of ₹2,55,000 crore, including ₹5,000 crore earmarked for the airline sector.
Under the scheme, guarantee coverage will be 100% for MSMEs and 90% for non-MSMEs as well as the airline sector for the amount in default under the additional credit facility extended to eligible borrowers.
The scheme is intended to help businesses address short-term liquidity mismatches arising from the West Asia crisis.
Eligible borrowers under the scheme include MSMEs and non-MSMEs with existing working capital limits, along with scheduled passenger airlines having outstanding credit facilities as of 31 March 2026, provided their loan accounts are classified as standard.
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The official release stated that no guarantee fee will be charged under the scheme.
For MSMEs and non-MSMEs, the scheme allows additional credit support of up to 20% of peak working capital utilised during the fourth quarter of FY26, capped at ₹100 crore.
For airlines, additional credit support of up to 100% will be available, subject to a cap of ₹1,500 crore per borrower and fulfilment of specified conditions.
The tenor of loans under the scheme for MSMEs and non-MSMEs, excluding airlines, will be five years from the date of first disbursement, including a moratorium period of one year.
For the airline sector, the loan tenor will be seven years from the date of first disbursement, including a moratorium period of two years.
The government said the maximum period of guarantee cover under the scheme would remain co-terminus with the tenor of the loan.
According to the release, the scheme will apply to all eligible loans sanctioned from the date of issuance of guidelines by NCGTC up to March 31, 2027.
The government stated that the scheme is aimed at helping businesses maintain operations, protect jobs, sustain supply chains, and ensure uninterrupted domestic production amid challenges arising from the West Asia conflict.
It added that the proposed credit guarantee support is expected to particularly assist MSMEs and the airline sector in meeting additional working capital requirements while helping maintain resilience across the broader economic ecosystem.
