CNBC-TV18 reported earlier today, citing sources, that the Union Cabinet was set to review a revamped Emergency Credit Line Guarantee Scheme (ECLGS). The official announcement has since confirmed this news.
The Union Cabinet has approved ECLGS 5.0, which is intended to enhance credit support for businesses in light of new external challenges, including the ongoing crisis in West Asia.
The proposed framework aims to extend credit guarantee support to a broader array of sectors, providing more comprehensive coverage than previous versions of the scheme, which primarily focused on specific distressed segments during the pandemic.
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Earlier sources suggested that the total credit guarantee envelope under the revised ECLGS could range from ₹2.25 lakh crore to ₹2.50 lakh crore. However, the final approved amount has been set at ₹2.55 lakh crore.
The scheme is expected to feature sector-wise sub-limits to ensure a balanced allocation of guarantees across different industries.
The government has been formulating a new ECLGS-like intervention to address emerging external risks, including geopolitical tensions in West Asia, which have led to fluctuations in global trade, energy prices, and supply chains.
While the proposal was earlier included in the Cabinet agenda, it has now received approval, aligning broadly with expectations.
Cabinet clears ECLGS 5.0; targets ₹2.55 lakh crore credit flow
The Union Cabinet has ratified ECLGS 5.0, which will provide credit guarantee coverage through the National Credit Guarantee Trustee Company Limited (NCGTC) to participating lending institutions for providing additional credit support to eligible borrowers.
The scheme aims for a total incremental credit flow of ₹2,55,000 crore, which includes ₹5,000 crore allocated for the airline sector. It offers a 100% guarantee for MSMEs and 90% for non-MSMEs and airlines, focusing on alleviating liquidity stress due to the situation in West Asia.
Eligible borrowers encompass MSMEs, non-MSMEs, and scheduled passenger airlines with standard accounts as of March 31, 2026. The scheme will remain effective for loans sanctioned until March 31, 2027, with loan tenures of up to five years (seven years for airlines), including moratorium benefits.
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