- Cabinet approves Rs 2.55 lakh crore credit support, extending ECLGS.
- Scheme offers 100% guarantee for MSMEs, 90% for others.
- Additional credit up to 20% for MSMEs, 100% for airlines.
Cabinet Approves Rs 2.55 Lakh Crore Credit Support
Amid pressure from the West Asia crisis, the Union Cabinet on Tuesday approved the fifth edition of the Emergency Credit Line Guarantee Scheme, or ECLGS, to support credit flow worth Rs 2.55 lakh crore. The scheme aims to provide additional working capital support to MSMEs, non-MSMEs and scheduled passenger airlines facing short-term liquidity pressure. A separate allocation of Rs 5,000 crore has been kept for the airline sector.
Guarantee Coverage Under the Scheme
The credit guarantee coverage will be provided to Member Lending Institutions, or MLIs, through the National Credit Guarantee Trustee Company Limited, or NCGTC. As per the government statement, MSMEs will get 100 per cent guarantee coverage.
Non-MSMEs and the airline sector will get 90 per cent guarantee coverage. The guarantee will apply to the amount in default under the additional credit facility extended to eligible borrowers. According to reports, Rs 18,100 crore has been provided to meet obligations arising from defaults. Key Features of ECLGS 5.0 Eligible borrowers include MSMEs and non-MSMEs with existing working capital limits.
Scheduled passenger airlines with outstanding credit facilities as of March 31, 2026, will also be eligible, provided their accounts are classified as standard. No guarantee fee will be charged under the scheme. Eligible MSMEs and non-MSMEs can receive additional credit of up to 20 per cent of peak working capital utilised during Q4 FY26, subject to a cap of Rs 100 crore. For airlines, the additional credit can go up to 100 per cent, capped at Rs 1,500 crore per borrower, subject to specific conditions.
Loan Tenure and Scheme Duration
For MSMEs and non-MSMEs, excluding the airline sector, the loan tenure will be five years from the date of first disbursement. This includes a moratorium of one year. For the airline sector, the loan tenure will be seven years from the date of first disbursement, including a moratorium of two years. The guarantee cover will remain valid for a maximum period that is co-terminus with the loan tenure.
The scheme will apply to all loans sanctioned from the date of issue of guidelines by NCGTC up to March 31, 2027.
Expected Impact of Emergency Credit Line Guarantee Scheme
The scheme is aimed at helping businesses manage liquidity pressure caused by the West Asia conflict. It is expected to support business continuity, protect jobs and keep supply chains functional. For MSMEs and the airline sector, the credit guarantee scheme is expected to help meet additional working capital requirements through Banks and financial institutions. By providing timely liquidity support, the scheme seeks to aid domestic production, reduce the risk of job losses and strengthen resilience across the business ecosystem.
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