The Union Government on Tuesday announced a new Emergency Credit Line Guarantee Scheme (ECLGS 5.0) with an outlay of ₹18,100 crore to support micro, small and medium enterprises (MSMEs) and the aviation sector, both of which have been impacted by the ongoing West Asia conflict. The scheme was approved by the Union Cabinet and is expected to facilitate additional credit flow of up to ₹2.55 lakh crore in the economy.

Information and Broadcasting Minister Ashwini Vaishnaw said the initiative has been designed to address financial stress faced by businesses due to disruptions linked to the geopolitical situation in West Asia. He added that the scheme will provide targeted liquidity support, helping affected sectors maintain operations and manage short-term cash flow challenges.

Under the scheme, the aviation sector will receive specific support of around ₹5,000 crore, with passenger airlines eligible for credit support of up to 100 per cent of their peak credit exposure, capped at ₹1,500 crore. Other eligible institutions can access up to 20 per cent of their fund-based working capital requirements, subject to a ceiling of ₹100 crore.

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The government stated that the credit guarantee coverage will be extended through the National Credit Guarantee Trustee Company Limited (NCGTC). MSMEs will receive 100 per cent guarantee coverage, while non-MSMEs and airlines will receive up to 90 per cent coverage on defaulted amounts under additional credit facilities. The aim is to ensure banks and financial institutions continue lending to stressed but viable businesses.

Officials said the scheme is intended to help businesses manage liquidity mismatches arising from external shocks, while also safeguarding jobs and maintaining continuity in supply chains. By ensuring timely access to credit, the government expects the scheme to stabilise affected sectors and prevent large-scale disruptions in operations and employment.

The tenure of loans under ECLGS 5.0 has been structured differently across sectors. For the aviation industry, the repayment period will extend up to seven years, including a two-year moratorium. For MSMEs and other non-MSME borrowers, the tenure will be five years, with a one-year moratorium period from the date of first disbursement.

The scheme will apply to loans sanctioned from the date of issuance of guidelines by NCGTC until March 31, 2027. Civil Aviation Minister K. Rammohan Naidu described the initiative as a crucial step for the aviation sector, stating that it will help airlines navigate short-term liquidity challenges, protect jobs, and ensure uninterrupted connectivity.The government also emphasised that MSMEs, which form a significant part of India’s industrial base, will benefit from sustained credit support, enabling them to continue production and withstand external economic pressures caused by the West Asia conflict.

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