New Delhi, May 5 : The Union Cabinet, chaired by Prime Minister Narendra Modi, on Tuesday approved the launch of the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0, aimed at providing crucial financial support to businesses impacted by the ongoing West Asia crisis.

Under the new phase of the scheme, the government will extend enhanced credit guarantee coverage through the National Credit Guarantee Trustee Company Limited (NCGTC).

The scheme offers 100 per cent guarantee coverage for micro, small and medium enterprises (MSMEs) and 90 per cent coverage for non-MSMEs as well as the airline sector.

This backing is intended to encourage banks and financial institutions to lend additional funds without fear of default risks.

ECLGS 5.0 will allow eligible borrowers to access additional credit of up to 20 per cent of their peak working capital utilisation during the fourth quarter of FY26, subject to a cap of Rs 100 crore.

For airlines, the support is significantly higher, with loans of up to 100 per cent of eligible exposure capped at Rs 1,500 crore per borrower, provided specific conditions are met. Notably, the scheme does not impose any guarantee fee, reducing the financial burden on borrowers.

The tenure of loans under the scheme has been structured to provide flexibility. For MSMEs and other businesses, the loan term will be five years, including a one-year moratorium on principal repayment.

In the case of airlines, the repayment period extends to seven years, with a two-year moratorium. The guarantee cover will remain valid for the entire duration of the loan.

The scheme will be applicable to loans sanctioned from the date of issuance of guidelines by NCGTC until March 31, 2027. Eligibility is limited to borrowers with existing working capital limits or outstanding credit facilities as of March 31, 2026, provided their accounts are classified as standard.

The government expects Emergency Credit Line Guarantee Scheme 5.0 to play a critical role in helping businesses navigate short-term liquidity challenges triggered by geopolitical tensions in West Asia.

/IANS