Cabinet Approves Emergency Credit Line Guarantee Scheme 5.0

The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 to support businesses facing liquidity pressures due to the ongoing West Asia crisis. The scheme is aimed at helping Micro, Small and Medium Enterprises (MSMEs), non-MSMEs and the airline sector access additional working capital through guaranteed loans.

Under the scheme, the National Credit Guarantee Trustee Company Limited (NCGTC) will provide credit guarantee coverage to Member Lending Institutions (MLIs) for loans extended to eligible borrowers. The government said the initiative targets an additional credit flow of INR 2.55 lakh crore, including INR 5,000 crore earmarked for airlines.

The scheme will provide 100 percent guarantee coverage for MSMEs and 90 percent coverage for non-MSMEs and airlines. No guarantee fee will be charged under the programme.

Eligible borrowers include MSMEs and non-MSMEs with existing working capital limits, as well as scheduled passenger airlines with outstanding credit facilities as of March 31, 2026. To qualify, borrower accounts must be classified as standard.

Businesses will be able to avail additional credit of up to 20 percent of their peak working capital utilised during the fourth quarter of FY26, with the amount capped at INR 100 crore. For airlines, the support can extend up to 100 percent of the eligible amount, subject to a maximum of INR 1,500 crore per borrower and certain conditions.

The loan tenure for MSMEs and non-MSMEs, excluding airlines, will be five years, including a one-year moratorium period. For the airline sector, loans will have a tenure of seven years with a two-year moratorium.

The guarantee cover will remain valid for the entire duration of the loan. The scheme will apply to all eligible loans sanctioned from the date the guidelines are issued by NCGTC until March 31, 2027.

According to the government, the move is expected to help businesses manage short-term financial stress arising from disruptions linked to the West Asia conflict. Officials said the scheme is intended to support business continuity, safeguard employment and maintain supply chains across sectors. The government also expects the initiative to strengthen domestic production and improve the resilience of the overall business ecosystem.