The cabinet has approved the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 to provide ₹2.55 lakh crore in additional credit support to businesses facing liquidity challenges due to the West Asia conflict. According to the latest press release by the Union Cabinet, this new credit scheme will provide significant additional credit to help businesses weather the effects of the West Asian conflict. The initiative specifically targets the country's airlines and small enterprises that are experiencing economic pressures due to the ongoing regional tensions, with the scheme designed to help businesses tide over short-term liquidity mismatches arising from the West Asia situation.
Under the scheme, the National Credit Guarantee Trustee Company Limited (NCGTC) will provide 100% credit guarantee coverage for MSMEs and 90% for non-MSMEs as well as the airline sector to Member Lending Institutions for the amount in default under the additional credit facility. The support is targeted at Micro, Small & Medium Enterprises (MSMEs) and non-MSMEs with existing working capital limits and scheduled passenger airlines with outstanding credit facilities as of March 31, 2026, provided their accounts are standard. The guarantee fee has been kept at nil to ensure easier access to credit, with the scheme applicable to all loans sanctioned up to March 31, 2027.
For MSMEs and non-MSMEs, the additional credit can go up to 20% of peak working capital utilised during Q4 FY26, capped at ₹100 crore. For airlines, the support can be up to ₹1,500 crore per borrower, subject to specific conditions. The tenor of the loan has been set at 5 years for MSMEs and non-MSMEs, including a moratorium of 1 year, while for the airline sector it is 7 years with a moratorium of 2 years. The scheme aims to provide credit guarantee coverage of 100% for MSMEs and 90% for non-MSMEs as well as airline sector, with the initiative expected to ensure that additional working capital needs of MSMEs and the airline sector are met by banks and financial institutions.
According to a comprehensive report by State Bank of India (SBI), the newly approved ECLGS 5.0 could benefit nearly 1.1 crore MSME accounts by providing additional credit support to businesses affected by the ongoing West Asia conflict. As per the SBI analysis, 'our preliminary estimates indicate that ~1.1 crore MSME accounts (~45% of total MSME portfolio) will be eligible to get benefit from the scheme with per account an average additional credit flow of ₹2 to 2.3 lakh'. The government has targeted an overall additional credit flow of ₹2.55 lakh crore under the scheme, including ₹5,000 crore earmarked for the aviation sector. The timely intervention is expected to ensure liquidity support, protect jobs, sustain supply chains, and strengthen the resilience of the Indian economy.
