Cabinet Approves Emergency Credit Line Guarantee Scheme 5.0

08 May 2026 CW Team

ECLGS 5.0 extends 100 per cent guarantee cover for MSMEs and 90 per cent for non-MSMEs and the airline sector for amounts in default under additional credit facilities aimed at short-term liquidity mismatches. The facility sets a maximum loan limit of Rs 10 bn per borrower with an additional Rs 5 bn subject to equivalent equity infusion by the borrower. Loans may have a tenure of up to seven years, including a two-year moratorium on repayment, to ease immediate cash flow pressures.

The scheme allows conversion of up to 50 per cent of interest into a Funded Interest Term Loan (FITL) and offers additional credit up to 20 per cent of peak working capital utilised during the fourth quarter of fiscal year 2026, capped at Rs one bn. For airlines the scheme permits additional support up to 100 per cent, capped at Rs 15 bn per borrower, subject to specified conditions. Guarantee cover will be co-terminus with the tenure of the loan and the scheme applies to loans sanctioned up to 31 March 2027.

The government expects the measure to strengthen lender confidence, improve credit flow to the sector and support operational stability at a time of rising aviation turbine fuel prices and exchange rate volatility. Officials noted the scheme is intended to sustain employment, preserve sectoral capacity and reduce the pass-through of increased costs to passengers while maintaining connectivity. Implementation guidance will be issued by NCGTC to Member Lending Institutions for operationalisation.

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The Union Cabinet has approved the Emergency Credit Line Guarantee Scheme 5.0 (ECLGS 5.0) to provide targeted credit support to Indian airlines and micro, small and medium enterprises (MSMEs) amid operational disruptions linked to the West Asia situation. The scheme allocates Rs 2.55 tn of additional credit flow, of which Rs 50 bn has been earmarked for airlines, and will be implemented by Member Lending Institutions (MLIs) with guarantee cover from National Credit Guarantee Trustee Company Limited (NCGTC). ECLGS 5.0 extends 100 per cent guarantee cover for MSMEs and 90 per cent for non-MSMEs and the airline sector for amounts in default under additional credit facilities aimed at short-term liquidity mismatches. The facility sets a maximum loan limit of Rs 10 bn per borrower with an additional Rs 5 bn subject to equivalent equity infusion by the borrower. Loans may have a tenure of up to seven years, including a two-year moratorium on repayment, to ease immediate cash flow pressures. The scheme allows conversion of up to 50 per cent of interest into a Funded Interest Term Loan (FITL) and offers additional credit up to 20 per cent of peak working capital utilised during the fourth quarter of fiscal year 2026, capped at Rs one bn. For airlines the scheme permits additional support up to 100 per cent, capped at Rs 15 bn per borrower, subject to specified conditions. Guarantee cover will be co-terminus with the tenure of the loan and the scheme applies to loans sanctioned up to 31 March 2027. The government expects the measure to strengthen lender confidence, improve credit flow to the sector and support operational stability at a time of rising aviation turbine fuel prices and exchange rate volatility. Officials noted the scheme is intended to sustain employment, preserve sectoral capacity and reduce the pass-through of increased costs to passengers while maintaining connectivity. Implementation guidance will be issued by NCGTC to Member Lending Institutions for operationalisation.

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