The Modi government on Tuesday approved a loan facility of over Rs 2.5 lakh crore, backstopped by the Centre, to assist businesses—ranging from MSMEs to airlines—in coping with the impact of the West Asia crisis by providing additional funding. For many companies, payment cycles have lengthened as ships take longer routes and freight rates have surged, while others face higher costs for inputs, raw materials, and fuel. This has increased their financing needs, and the scheme aims to bridge that gap through additional credit of up to 20% of the peak working capital used during the fourth quarter of last year, with an overall cap of Rs 100 crore. For airlines, the cabinet has prescribed up to 100% of the working capital used, with a cap of Rs 1,500 crore per borrower.
ECLGS 5.0: Key Features and Coverage
Using the Covid-era playbook, the cabinet approved the Emergency Credit Line Guarantee Scheme 5.0 (ECLGS 5.0) to provide credit guarantee coverage of 100% for MSMEs and 90% for other companies, including airlines. The National Credit Guarantee Trustee Co Ltd will provide guarantees for the amount in default under the additional credit facility extended to eligible borrowers. Prime Minister Narendra Modi tweeted, “The ECLGS 5.0 approved by the Cabinet 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.”
Outlay and Guarantee Fees Waived
Information and Broadcasting Minister Ashwini Vaishnaw told reporters that ECLGS will have an outlay of Rs 18,100 crore. He stated in a presentation that guarantee fees have been waived. The scheme will remain open until March 31, indicating that the government is preparing for a prolonged impact of the conflict, given the disruption in supply chains and the destruction of refining and gas facilities in the Gulf region.
Eligibility and Repayment Terms
The scheme will be open to entities that had bank loans as of the end of March 2026 and whose accounts were classified as “standard.” Companies other than airlines will get up to five years from the first disbursement to repay the loan, including a one-year moratorium on principal payment. For airlines, the tenor is up to seven years.
