Emergency Credit Line Guarantee Scheme (ECLGS) 5.0

The Union Cabinet, chaired by Prime Minister Narendra Modi, approved the fifth edition of the Emergency Credit Line Guarantee Scheme (ECLGS 5.0) with an outlay of ₹18,100 crore.

Purpose and Benefits

• Supports micro, small, and medium enterprises (MSMEs), airlines, and other businesses in meeting working capital needs.
• Aims to unlock additional credit flow of ₹2.55 trillion, including a ₹5,000 crore allocation for the aviation sector.
• Designed to help firms sustain operations, protect jobs, and stabilize supply chains.
• Provides timely liquidity to sustain businesses and prevent job losses.

Scheme Details

• Government guarantees 100% of losses for MSMEs and 90% for larger firms and airlines via the National Credit Guarantee Trustee Company Limited (NCGTC).
• Eligible businesses can receive additional loans of up to 20% of their peak working capital utilization in Q4 FY26, capped at ₹100 crore.
• Airlines can borrow up to 100% of their requirement, with a ceiling of ₹1,500 crore per borrower.
• Loan tenures: Five years for most sectors (one-year moratorium) and seven years for airlines (two-year moratorium).
• The scheme is valid for loans sanctioned from the date of NCGTC notification until March 31, 2027.

Context and Challenges

• The aviation sector faces an existential crisis aggravated by geopolitical conflicts and rising aviation turbine fuel (ATF) prices.
• Pakistan’s airspace closure and extended flight paths due to the West Asia conflict have increased fuel consumption and costs.
• Fuel costs now account for 50% to 60% of operating costs, up from the typical 40%.
• Carriers like Air India and SpiceJet have scaled back international operations due to financial stress.

Eligibility and Coverage

• Eligible entities include MSMEs, non-MSMEs, and scheduled passenger airlines with existing working capital as of March 31, 2026.
• Guarantee cover: 100% for MSMEs; 90% for non-MSMEs and airlines.
• Support limit: Up to 20% of peak working capital (Q4 FY26), maximum ₹100 crore for MSMEs/non-MSMEs; Up to 100%, maximum ₹1,500 crore for airlines.