Cabinet launches ECLGS 5.0 to ease liquidity stress, targets Rs 2.55 lakh crore credit push

The Union Cabinet on Tuesday approved the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 to provide additional liquidity support to businesses affected by the ongoing West Asia crisis, Information and Broadcasting Minister Ashwini Vaishnaw said after the meeting.

‎Addressing reporters, Vaishnaw said the scheme will extend credit guarantee coverage through the National Credit Guarantee Trustee Company Limited to Member Lending Institutions, enabling them to provide additional loans to eligible borrowers. “The scheme is designed to help businesses tide over short-term liquidity mismatches arising out of the evolving geopolitical situation in West Asia,” he added.

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‎Under ECLGS 5.0, the government will offer 100% guarantee coverage for micro, small and medium enterprises (MSMEs) and 90% coverage for non-MSMEs as well as the airline sector on the additional credit extended. The scheme aims to facilitate a total additional credit flow of Rs 2.55 lakh crore, including Rs 5,000 crore specifically earmarked for the aviation sector.

‎Eligible beneficiaries include MSMEs and non-MSMEs with existing working capital limits, along with scheduled passenger airlines that had outstanding credit facilities as of March 31, 2026, provided their accounts are classified as standard. Businesses can avail additional credit of up to 20% of their peak working capital utilisation during the fourth quarter of FY26, capped at Rs 100 crore, while airlines can access support of up to 100% of their outstanding loans, subject to a cap of Rs 1,500 crore per borrower and other conditions.

‎The loans under the scheme will carry no guarantee fee. For MSMEs and non-MSMEs, the loan tenor will be five years, including a one-year moratorium, while airlines will have a seven-year tenor with a two-year moratorium. The guarantee cover will remain co-terminus with the duration of the loan.

‎The scheme will apply to all loans sanctioned from the date of issuance of guidelines by NCGTC until March 31, 2027.
‎Officials said the initiative is intended to help businesses sustain operations, safeguard jobs, and maintain supply chains amid global uncertainties. The government expects the scheme to play a key role in supporting MSMEs and the aviation sector in meeting their working capital needs while ensuring continuity in domestic production and economic resilience.

‎Originally introduced during the COVID-19 pandemic to provide emergency liquidity support, the ECLGS framework has been expanded in phases to address evolving economic challenges. With the rollout of ECLGS 5.0, the government aims to cushion the impact of external shocks and strengthen stability across critical sectors of the economy.