ECLGS 5.0 approved: Govt to provide credit support to MSMEs, airlines, targets ₹2.55 lakh cr credit flow

The Union Cabinet has approved the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0, aiming to provide fresh liquidity suppot to businesses impacted by global uncertainties, particularly the ongoing West Asia crisis. The scheme seeks to facilitate an additional credit flow of ₹2.55 lakh crore, including a dedicated ₹5,000 crore window for the airline sector.

The latest version of the scheme will offer credit guarantee coverage through the National Credit Guarantee Trustee Company Limited (NCGTC) to banks and financial institutions, enabling them to extend additional working capital to eligible borrowers without increasing their risk exposure.

MSMEs and stressed sectors

Under ECLGS 5.0, micro, small and medium enterprises (MSMEs) will receive 100% government-backed guarantee on incremental loans, while non-MSMEs and airlines will be covered up to 90%. This structure is designed to encourage lenders to continue extending credit despite rising global risks.

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Eligible borrowers include MSMEs, non-MSMEs, and scheduled passenger airlines that had outstanding credit facilities as of March 31, 2026, provided their accounts were classified as standard. The scheme specifically targets businesses facing short-term liquidity mismatches due to external disruptions.

Higher credit limits, zero guarantee fee

The scheme allows additional credit of up to 20% of the peak working capital utilised during the fourth quarter of FY26, capped at ₹100 crore per borrower. For airlines, the support is significantly higher—up to 100% of their outstanding credit, subject to a cap of ₹1,500 crore per borrower and specific conditions.

Importantly, the scheme carries zero guarantee fee, reducing the cost burden for borrowers and making credit more accessible during a period of financial strain.

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Flexible repayment structure
The loan tenure under ECLGS 5.0 is structured to ease repayment pressure. For MSMEs and non-MSMEs, loans will have a five-year tenure, including a one-year moratorium on principal repayment. For airlines, the tenure extends to seven years, with a two-year moratorium.

The guarantee cover will remain co-terminus with the loan tenure, ensuring lenders remain protected throughout the repayment period.

Implementation timeline and expected impact

The scheme will apply to all loans sanctioned from the date of notification until March 31, 2027, providing a wide window for businesses to access additional funding.

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The government expects ECLGS 5.0 to play a critical role in maintaining business continuity, safeguarding employment, and ensuring supply chain stability. By addressing immediate liquidity needs, the scheme aims to prevent disruptions in domestic production and support economic resilience.

Originally introduced during the COVID-19 pandemic, the ECLGS framework has evolved into a key policy tool for crisis response. With the latest iteration, the government is extending targeted support to sectors vulnerable to global shocks, reinforcing its commitment to sustaining growth amid external headwinds.