EMERGENCY CREDIT LINE GUARANTEE SCHEME (ECLGS) 5.0 EXPLAINED

Why In News?

The Union Cabinet approved the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0.

About Emergency Credit Line Guarantee Scheme (ECLGS) 

Origin: The ECLGS was initially launched in May 2020 as part of the Aatmanirbhar Bharat Abhiyaan to provide emergency liquidity support to Micro, Small, and Medium Enterprises (MSMEs) and businesses impacted by the COVID-19 lockdowns.

Evolution of the Scheme (Phases 1.0 to 4.0)

• ECLGS 1.0: Provided 20% additional credit to MSMEs and business enterprises.
• ECLGS 2.0: Expanded to cover 26 stressed sectors identified by the K.V. Kamath Committee, as well as the healthcare sector.
• ECLGS 3.0: Targeted high-contact sectors like Hospitality, Travel & Tourism, Leisure, and Civil Aviation, offering up to 40% of outstanding credit.
• ECLGS 4.0: Focused on healthcare facilities (e.g., hospitals, oxygen manufacturing) providing advances up to Rs. 2 crore.

Recent Update (ECLGS 5.0): In May 2026, the Union Cabinet approved ECLGS 5.0 to shield Indian industries from the economic fallout and short-term liquidity mismatches caused by the West Asia Crisis.

Implementing Agency

• The scheme is operated by the National Credit Guarantee Trustee Company Limited (NCGTC).
• NCGTC is a special purpose vehicle set up by the Department of Financial Services, Ministry of Finance, to act as a common trustee company managing multiple government credit guarantee funds.
• Loans guaranteed under this scheme are assigned a 0% risk weight in the books of Member Lending Institutions (banks/NBFCs), reducing their capital adequacy burden.

Key Features of ECLGS 5.0

Target Corpus: Additional credit flow of Rs. 2,55,000 crore, which includes a dedicated Rs. 5,000 crore relief package for the debt-ridden passenger airline sector.

Guarantee Coverage: The government, through NCGTC, provides a 100% credit guarantee for MSMEs and a 90% guarantee for non-MSMEs and the aviation sector.

Eligibility: MSMEs, non-MSMEs, and scheduled passenger airlines with existing working capital limits as of March 31, 2026. 

Quantum of Support:

• For MSMEs/Non-MSMEs: Top-up loan of up to 20% of their peak working capital utilized during Q4 FY26, capped at Rs. 100 crore.
• For Airlines: Up to 100% of peak credit, capped at Rs. 1,500 crore per borrower.

Favorable Loan Terms:

• Cost: Zero guarantee fee and no additional collateral/security required.
• Tenor & Moratorium (MSMEs): 5-year repayment tenure, which includes a 1-year moratorium on principal repayment.
• Tenor & Moratorium (Airlines): 7-year repayment window with a 2-year moratorium.
• Duration: Applicable to all loans sanctioned up to March 31, 2027.

Source: PIB