Union Cabinet Approves Emergency Credit Line Guarantee Scheme 5.0
The Union Cabinet, led by Prime Minister Shri Narendra Modi, has approved the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0, designed to support businesses struggling with liquidity issues due to the ongoing crisis in West Asia. This initiative offers substantial credit guarantee coverage, with 100% for Micro, Small, and Medium Enterprises (MSMEs) and 90% for non-MSMEs and the airline sector. The scheme will enable Member Lending Institutions (MLIs) to provide relief to eligible borrowers facing short-term financial challenges.
Eligible Borrowers and Coverage Details
Under the ECLGS 5.0, the scheme is open to MSMEs and non-MSMEs that have existing working capital limits, as well as scheduled passenger airlines that maintain outstanding credit facilities as of March 31, 2026. It is crucial for these accounts to remain standard to qualify for the support.
Essential Features of the Scheme
One of the most attractive aspects of this scheme is that it imposes no guarantee fee. Eligible businesses can avail themselves of additional credit amounting to 20% of their peak working capital utilized during the fourth quarter of FY 2026, capped at ₹100 crore. For the airline sector, the additional support can reach up to ₹1,500 crore per borrower, conditional on specific requirements.
The loan terms differ for various sectors. For MSMEs and non-MSMEs (excluding airlines), the loan tenor is set at five years from the first disbursement date, which includes a one-year moratorium. Conversely, airlines are granted a longer tenor of seven years, with a two-year moratorium included.
Scheme Duration and Impact
The ECLGS 5.0 will be applicable for all loans sanctioned from the date of the scheme’s announcement until March 31, 2027. By providing timely liquidity, this initiative aims to help businesses navigate difficulties stemming from the West Asia situation, ultimately protecting jobs and sustaining supply chains.
The implementation of this credit guarantee scheme marks a significant step in ensuring that MSMEs and the airline sector fulfill their additional working capital requirements through financial institutions. This timely financial support is expected to sustain businesses and help prevent job losses, while promoting uninterrupted production within the domestic market. Overall, the scheme aims to reinforce the resilience of the business ecosystem amid ongoing economic challenges.
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