The Indian government has approved the Emergency Credit Line Guarantee Scheme (ECLGS 5.0) with an outlay of Rs 18,100 crore to support micro, small, and medium enterprises (MSMEs) and airlines impacted by the West Asia conflict, according to a report by PTI.
Expected Credit Flow
The scheme is anticipated to facilitate additional credit flow of Rs 2.55 lakh crore, including Rs 5,000 crore specifically allocated for the aviation sector.
Information and Broadcasting Minister Ashwini Vaishnaw, while briefing the media, stated, "The scheme has been brought to address the stress in MSME and airline sectors due to the West Asia conflict."
Eligibility and Caps
Under the scheme, passenger airlines are eligible for up to 100 per cent of their peak credit, subject to a cap of Rs 1,500 crore. Other institutions can access up to 20 per cent of their fund-based working capital, with a maximum limit of Rs 100 crore.
Objectives and Benefits
The government emphasized that the initiative aims to help businesses manage disruptions caused by the conflict, sustain operations, and protect jobs.
An official release noted, "Additionally, this is expected to help businesses maintain their operations, protect jobs, and sustain supply chains. The proposed credit guarantee scheme is a major step to help businesses, particularly MSMEs and airline sector, to ensure their additional working capital needs are catered by the banks and financial institutions."
Credit Guarantee Coverage
The scheme offers 100 per cent credit guarantee coverage for MSMEs and 90 per cent for non-MSMEs and airlines to lending institutions through the National Credit Guarantee Trustee Company Limited (NCGTC).
Designed to address short-term liquidity mismatches stemming from the crisis, the scheme aims to ensure uninterrupted domestic production and supply chains.
Loan Tenure Details
For airlines, the loan tenure is set at seven years, inclusive of a two-year moratorium. MSMEs and non-MSMEs will receive a five-year tenure with a one-year moratorium.
The scheme applies to loans sanctioned from the date of notification until March 31, 2027.
Aviation Sector Perspective
Civil Aviation Minister K Rammohan Naidu highlighted the importance of the move for the aviation sector. In a post on X, he said, "It will provide strong financial backing to safeguard jobs, sustain connectivity, and ensure resilience across the aviation ecosystem, while also supporting MSMEs."
Background
MSMEs and airlines have been under significant pressure since the West Asia conflict began in February, affecting costs, operations, and liquidity. The ECLGS was initially introduced in May 2020 to support businesses during the Covid-19 pandemic.
