Context:

• The Union Cabinet, chaired by Prime Minister Narendra Modi, approved the fifth phase of the Emergency Credit Line Guarantee Scheme (ECLGS 5.0).

Key Points:

• Objective: To provide relief to businesses affected by global supply disruptions and rising crude oil prices due to the West Asia crisis.
• Coverage Provision: 100% for MSMEs and 90% for Non-MSMEs and the airline sector.
• Total Financial Target: Additional credit flow of ₹2.55 lakh crore under this phase.
• Implementing Agency: National Credit Guarantee Trustee Company Limited (NCGTC)
• Nodal Ministry: Ministry of Finance

Major Features:

• Eligible Borrowers: MSMEs and Non-MSMEs with existing working capital limits as of March 31, 2026, and scheduled passenger airlines with outstanding loan facilities, provided their accounts are standard.
• Guarantee Coverage: 100% for MSMEs and 90% for Non-MSMEs and airlines.
• Guarantee Fee: Nil

Assistance Amount:

• Additional credit up to 20% of the maximum working capital utilized during Q4 of FY 2026 (maximum ₹100 crore).
• For airlines, up to 100% assistance with a cap of ₹1,500 crore per borrower, subject to conditions.

Loan Tenure:

• MSME/Non-MSME (excluding airlines): 5 years from first disbursement, including 1-year moratorium.
• Airline Sector: 7 years from first disbursement, including 2-year moratorium.
• Guarantee Cover Period: Co-terminus with the loan tenure.
• Scheme Validity: Applicable for all loans sanctioned till March 31, 2027.

Emergency Credit Line Guarantee Scheme (ECLGS):

• Launch: May 2020 by the Department of Financial Services under the Ministry of Finance to support businesses affected by the COVID-19 lockdown.
• Objective: To provide additional working capital for meeting operational liabilities and restarting businesses.
• Guarantee Coverage: 100% guarantee to Member Lending Institutions (MLIs) against borrower defaults (90% for certain sectors in ECLGS 5.0).
• Implementing Agency: National Credit Guarantee Trustee Company Limited (NCGTC)
• Collateral-Free Loan: No additional collateral or security required.

Different Phases of ECLGS:

ECLGS 1.0:

• Main Provision: Additional credit up to 20% of total outstanding loans as of February 29, 2020.
• Feature: Collateral-free loans.
• Beneficiaries: MSMEs, business enterprises, and MUDRA borrowers with 100% government guarantee.

ECLGS 2.0:

• Focus: 26 stressed sectors identified by the Kamath Committee and the healthcare sector.

ECLGS 3.0:

• Expansion: Covered hospitality, tourism, leisure, and travel sectors.
• Loan Limit: Additional credit up to 40% of outstanding loans.

ECLGS 4.0:

• Objective: Loans for setting up oxygen generation plants during the second COVID wave.
• Assistance: 100% guaranteed loans up to ₹2 crore for hospitals, nursing homes, clinics, and medical colleges.
• Interest Rate Cap: Maximum interest rate fixed at 7.5%.