The Union Cabinet, chaired by Prime Minister Narendra Modi, on Tuesday approved the fifth version of the Emergency Credit Line Guarantee Scheme (ECLGS 5.0) to provide additional financial support to businesses facing liquidity pressures due to the ongoing West Asia situation.
The scheme will enable banks and financial institutions to extend additional credit to eligible borrowers with government-backed guarantees through the National Credit Guarantee Trustee Company Limited. It aims to facilitate a total additional credit flow of ₹2.55 lakh crore, including ₹5,000 crore earmarked for the airline sector.
Under ECLGS 5.0, micro, small and medium enterprises (MSMEs) will receive 100 per cent guarantee coverage on the additional credit extended, while non-MSMEs and airlines will be covered up to 90 per cent. The guarantee will apply to the amount in default, reducing the risk for lending institutions.
Eligible borrowers include MSMEs, non-MSMEs, and scheduled passenger airlines that had outstanding credit facilities as of March 31, 2026, with their accounts classified as standard.
The scheme allows additional credit of up to 20 per cent of the peak working capital utilised during the fourth quarter of FY 2025–26, with a cap of ₹100 crore per borrower. For airlines, the additional credit can go up to 100 per cent, subject to a ceiling of ₹1,500 crore per borrower and compliance with specified conditions.
Loans under the scheme will have a tenure of five years for MSMEs and non-MSMEs, including a moratorium period of one year. For the airline sector, the loan tenure will be seven years, with a two-year moratorium. The guarantee cover will remain valid for the entire loan duration.
The scheme will be applicable to loans sanctioned from the date of issuance of guidelines by NCGTC until March 31, 2027.
The government said the initiative is aimed at helping businesses manage short-term liquidity challenges arising from global disruptions. It is also expected to support continuity in operations, safeguard employment, and ensure stability in supply chains, particularly for MSMEs and the aviation sector.
ECLGS 5.0 builds on earlier versions of the scheme introduced to cushion the impact of economic disruptions and is intended to strengthen the resilience of India’s business ecosystem.
