The Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 has been stopped by the Government of India. The government has terminated the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 in just over three months of its launch.
The allocated ₹2.5 trillion credit guarantee has been fully exhausted. The scheme was launched on May 8 to help businesses manage short-term liquidity mismatches arising from the West Asia crisis. The scheme was originally scheduled to run until March 31, 2027 but has been terminated in just over 3 months.
The National Credit Guarantee Trustee Company (NCGTC) has informed banks that the Emergency Credit Linked Guarantee Scheme (ECLGS) 5.0, which was announced in May this year to support MSMEs and non-MSMEs affected by the West Asia war, will be implemented only as long as the ₹2.5 lakh crore guarantee cover is reached.
All its member lending institutions have been asked to sanction loans under the ECLGS 5.0 to MSMEs and non-MSMEs and apply for credit guarantee under the scheme as it will be considered on first come first served basis subject the availability of guarantee cover. “Any sanction beyond available guarantee cover shall not be admissible under the scheme”, it told the banks in a communication dated August 18, 2026.
In an earlier communication issued on August 3, the NCGTC asked the banks to stop supporting non-MSMEs under the scheme as a substantial portion of the approved outlay was already used. Since the scheme was intended to ensure credit availability to MSMEs, fresh sanctions for non-MSMEs should not be taken up with immediate effect. All lending institutions should stop processing non-MSME loans under the ECLGS 5.0 and remaining amount would be for MSMEs, it said.
Public Sector Banks have also released their internal circulars and asked branches to stop ECLGS 5.0.
A big question is: how has such a large amount been utilised so quickly? Some bank employees said that banks have sanctioned ECLGS 5.0 loans to almost all eligible borrowers. The scheme was launched to support businesses affected by the Iran-Israel war. However, banks have reportedly sanctioned loans to businesses that were not directly affected by the conflict as well. As a result, the funds were utilised very quickly.
