Airlines, MSMEs Get Credit Lifeline as Govt Rolls Out ECLGS 5.0

• ECLGS 5.0 to unlock ₹2.55 lakh crore in additional credit

• MSMEs get full guarantee cover; airlines receive special relief window

• Scheme targets liquidity stress caused by West Asia crisis

In a move aimed at cushioning businesses against rising global uncertainties, the Union Cabinet chaired by Prime Minister Narendra Modi has approved the fifth version of the Emergency Credit Line Guarantee Scheme (ECLGS 5.0). The decision comes as companies, especially MSMEs and airlines, face mounting cost pressures linked to the ongoing West Asia crisis.

The scheme, which was launched initially in May 2020 during the Covid pandemic, has been a critical financial lifeline. The latest version is expected to facilitate an additional credit flow of ₹2.55 lakh crore, with a specific ₹5,000 crore allocation set aside for the aviation sector.

Prime Minister Narendra Modi said the Cabinet’s approval of ECLGS 5.0 reflects the government’s continued commitment to supporting businesses, particularly the MSME sector, during challenging global times.

In a post on X, he said the scheme would “enable additional credit flow with strong guarantee coverage,” helping a wide range of sectors. He added that the government remains focused on “empowering enterprises, sustaining growth momentum and safeguarding livelihoods.”

The government said in a press statement that the scheme is aimed at helping businesses navigate challenges arising from the West Asia conflict and maintain continuity of operations. It noted that the initiative would “help businesses maintain their operations, protect jobs, and sustain supply chains,” while addressing the additional working capital needs of MSMEs and the aviation sector through banks and financial institutions.

The statement added that “by providing timely liquidity,” the scheme is expected to sustain businesses, prevent job losses, and support uninterrupted domestic production while maintaining overall economic resilience.

Inside ECLGS 5.0 Credit Plan

Under ECLGS 5.0, banks and financial institutions can extend additional loans backed by government guarantees through the National Credit Guarantee Trustee Company (NCGTC). The guarantee will cover 100% of potential losses for MSMEs and 90% for larger firms and airlines, thereby reducing lending risks.

Eligible businesses can avail additional credit of up to 20% of their peak working capital utilisation recorded in the March quarter of FY26, with a maximum cap of ₹100 crore.

For airlines, which are under significant financial strain, the scheme allows borrowing of up to 100% of their requirements, capped at ₹1,500 crore per borrower, subject to conditions. Loan tenure has been structured to provide flexibility—five years for most sectors, including a one-year moratorium, and seven years for airlines with a two-year moratorium.

The scheme will apply to loans sanctioned from the date of notification by NCGTC until March 31, 2027, with the government guarantee remaining valid for the entire duration.