Union Cabinet Approves ECLGS 5.0 to Support Businesses Amid West Asia Crisis

The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved ECLGS 5.0 to help businesses facing financial difficulties due to the West Asia crisis.

Under this scheme, banks and other lending institutions can provide credit guarantee coverage to MSMEs, non-MSMEs and airlines to solve short-term cash problems. To incentivise lending, the government will provide a guarantee through NCGTC. The government will bear 100% of the default amount for MSMEs and 90% for non-MSMEs and airlines.

Major features of the scheme

1. Who can get it

MSMEs, non-MSMEs, and scheduled passenger airlines that already have working capital loans and whose accounts are in good standing as of  March 31, 2026.

2. Guarantee coverage

• MSMEs: 100% guaranteed by the government
• Non-MSMEs & airlines: 90% guaranteed

3. Fee

No fee for this guarantee

4. Quantum of support

They can get extra loans on top of their existing working capital:

• MSMEs/non-MSMEs: up to 20% of their peak working capital usage.
• Airlines: up to 100% additional credit (maximum Rs 1,500 crore per borrower, subject to conditions)

5. Loan repayment period

• MSMEs & non-MSMEs: 5 years total, including 1 year moratorium (no repayment in the first year)
• Airlines: 7 years total, including 2 years of moratorium

6. Guarantee duration

The guarantee stays active for the entire loan period.

7. Scheme validity period

Loans under this scheme can be sanctioned from the date the guidelines are issued until March 31, 2027.

Impact

This scheme is meant to help businesses deal with difficulties caused by the conflict in West Asia. The scheme would help companies, especially MSMEs and the airline sector, in meeting their working capital needs by providing them with additional credit through banks and financial institutions.

The scheme will support businesses in restarting their operations, protect jobs and keep supply chains running smoothly by ensuring the timely availability of funds.