The Union Cabinet, led by Prime Minister Narendra Modi, has given the green light to the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 on Tuesday. This scheme aims to offer vital financial assistance to businesses impacted by the ongoing crisis in West Asia. Under this new phase, the government will provide increased credit guarantee coverage through the National Credit Guarantee Trustee Company Limited (NCGTC).
The ECLGS 5.0 scheme will provide 100% guarantee coverage for micro, small, and medium enterprises (MSMEs) and 90% coverage for non-MSMEs and the airline sector. This move is designed to incentivize banks and financial institutions to extend additional funds without concerns about default risks. Eligible borrowers can access extra credit of up to 20% of their peak working capital utilization during the fourth quarter of FY26, with a maximum cap of Rs 100 crore.
For airlines, the support is more substantial, offering loans of up to 100% of eligible exposure capped at Rs 1,500 crore per borrower, subject to specific conditions. Notably, the scheme does not impose any guarantee fee, alleviating the financial burden on borrowers. The tenure of loans under the scheme is flexible, with a five-year term for MSMEs and other businesses, including a one-year moratorium on principal repayment.
In the case of airlines, the repayment period extends to seven years, with a two-year moratorium. The guarantee cover will be in effect for the entire loan duration. The scheme will apply to loans sanctioned from the issuance of guidelines by NCGTC until March 31, 2027. Eligibility is limited to borrowers with existing working capital limits or outstanding credit facilities as of March 31, 2026, provided their accounts are classified as standard.
The government anticipates that the Emergency Credit Line Guarantee Scheme 5.0 will be instrumental in assisting businesses in managing short-term liquidity challenges arising from geopolitical tensions in West Asia.
