Cabinet approves Emergency Credit Line Guarantee Scheme 5.0

Why in News

The Union Cabinet on 5 May 2026 approved the fifth version of the Emergency Credit Line Guarantee Scheme (ECLGS 5.0) to support businesses facing liquidity stress due to the West Asia crisis. 

About ECLGS

The Emergency Credit Line Guarantee Scheme was launched in May 2020 under the Aatmanirbhar Bharat Abhiyaan to provide collateral-free loans to businesses affected by economic disruptions. 

Key Features of ECLGS 5.0

• Implementing Agency: National Credit Guarantee Trustee Company Limited (NCGTC)
• Total Additional Credit Flow: ₹2.55 lakh crore
• Includes ₹5,000 crore for airline sector

Coverage & Guarantee

• MSMEs: 100% government guarantee on additional credit
• Non-MSMEs & Airlines: Up to 90% guarantee coverage
• Guarantee applies to default amount, reducing lender risk

Eligibility

• MSMEs, non-MSMEs, and scheduled passenger airlines
• Must have existing credit as of 31 March 2026
• Loan accounts should be standard (not NPA)

Credit Limits

• General borrowers:
  • Up to 20% of peak working capital (Q4 FY 2025–26)
  • Maximum: ₹100 crore
• Airlines:
  • Up to 100% additional credit
  • Maximum: ₹1,500 crore

Loan Tenure

• MSMEs & Non-MSMEs:
  • 5 years tenure
  • 1-year moratorium
• Airlines:
  • 7 years tenure
  • 2-year moratorium

Validity

• Applicable for loans sanctioned from notification date till 31 March 2027
• Guarantee valid for the entire loan period

Significance

• Addresses liquidity stress due to geopolitical disruptions
• Supports MSMEs and key sectors like aviation
• Encourages banks to lend by reducing credit risk
• Strengthens economic resilience and business continuity.

Source: PIB