The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0.
This scheme will provide credit guarantee support to businesses. It will cover 100% of loans for MSMEs and 90% for non-MSMEs and the airline sector. The guarantee will be given to Member Lending Institutions (MLIs) by the National Credit Guarantee Trustee Company Limited (NCGTC).
The scheme is meant to help borrowers manage short-term cash problems caused by the West Asia crisis.
This scheme will help banks sanction loans to MSMEs more easily. Normally, banks hesitate to sanction loans to customers who do not provide collateral security such as immovable property, fixed deposits, etc., because there is a high risk of default in unsecured loans.
To address this issue, the Government has launched this new scheme. Under the scheme, the Government will provide a guarantee to banks for the loans sanctioned.
If borrowers default on the loans, the Government will compensate the banks for the guaranteed amount. This will encourage banks to sanction more loans and increase the flow of credit to MSMEs.
Key Features of the Scheme
Eligible Borrowers: MSMEs, non-MSMEs, and scheduled passenger airlines can apply. They must have existing working capital limits and active loan accounts as of 31 March 2026. Their accounts must be standard (not defaulting).
Guarantee Coverage:
- 100% guarantee for MSMEs
- 90% guarantee for non-MSMEs and airlines
Guarantee Fee: No fee will be charged.
Loan Amount (Quantum of Support):
- Businesses can get additional credit up to 20% of their peak working capital used in Q4 FY 2026, with a maximum limit of ₹100 crore.
- Airlines can get up to 100% additional credit, capped at ₹1,500 crore per borrower, subject to conditions.
Loan Tenure:
- MSMEs and non-MSMEs: 5 years, including a 1-year moratorium
- Airlines: 7 years, including a 2-year moratorium
Guarantee Period: The guarantee will remain valid for the entire loan period.
Scheme Duration: The scheme will apply to loans approved from the date of guidelines issued by NCGTC up to 31 March 2027.
Objective of the Scheme
The scheme aims to help businesses deal with financial challenges caused by the West Asia conflict. It will support companies in continuing their operations, protecting jobs, and maintaining supply chains.
This scheme will also help banks and financial institutions provide additional working capital to businesses. By ensuring timely funding, it will support business stability, prevent job losses, and maintain steady production in the economy.
