The Union Cabinet on Tuesday has approved Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 to provide credit guarantee coverage to the eligible borrowers to tide over any short-term liquidity mismatches in view of West Asia Crisis. The scheme will be available to eligible borrowers, including MSMEs, non-MSMEs with existing working capital limits, and scheduled passenger airlines that had outstanding credit facilities as of March 31, 2026. A key condition is that these accounts must be classified as standard to qualify for the additional credit facility.
Under the scheme, credit guarantee coverage will be extensive, with 100% coverage for MSMEs and 90% for non-MSMEs as well as the airline sector. Notably, the guarantee will be provided without any fee, making it easier and more attractive for borrowers to access funds. The guarantees will be extended to Member Lending Institutions by National Credit Guarantee Trustee Company Limited.
On the decision, Prime Minister Narendra Modi said ECLGS 5.0 reflects our commitment to supporting India’s businesses, especially the MSME sector in challenging global times. “By enabling additional credit flow with strong guarantee coverage, this initiative will help a wide range of sectors. Our focus remains on empowering enterprises, sustaining growth momentum and safeguarding livelihoods,” he said.
How to avail? What is the tenure?
In terms of financial support, eligible borrowers can avail additional credit of up to 20% of the peak working capital utilised during the fourth quarter of FY26, subject to a cap of Rs 100 crore. For airlines, the support is more substantial, allowing up to 100% additional credit with a ceiling of Rs 1,500 crore per borrower, provided they meet specific conditions.
The loan structure differs across sectors. For MSMEs and non-MSMEs (excluding airlines), the loan tenure is set at five years from the date of first disbursement, including a moratorium period of one year. For airlines, the tenure extends to seven years, with a moratorium of two years, offering a longer runway for recovery.
The guarantee cover will remain valid for the entire duration of the loan, meaning it will be co-terminus with the loan tenure. The scheme itself will be in force for loans sanctioned from the date of issuance of guidelines by NCGTC until March 31, 2027, providing a defined window for businesses to access this support.
Industry leaders welcome the move
Chandrajit Banerjee, Director General, CII said, ECLGS 5.0, is a bold and forward-looking intervention that will shield Indian industry from the mounting economic pressures of the West Asia crisis. “We deeply appreciate that this scheme reflects CII’s specific recommendation to the Ministry of Finance, demonstrating the government’s continued responsiveness to industry concerns. By acting swiftly and decisively, the government has sent a powerful signal of its resolve to stand by segments that have borne a brunt of the present crisis, helping them tide over immediate pressures and emerge unscathed from this period of heightened global uncertainty.”
Pallavi Shrivastava, Co-Founder of Progcap, a MSME Fintech, said, “ECLGS 5.0 comes at a time when many MSMEs are dealing with tighter cash flow cycles and increasing uncertainty in their day-to-day operations. What really matters in such moments is timely access to working capital and the 100% guarantee structure helps unlock that by giving lenders the confidence to move faster. From what we see on the ground, demand for short-term, flexible credit is only increasing, and interventions like this play a critical role in helping businesses stay resilient, keep their operations running, and protect livelihoods across the value chain.”
