The cabinet has approved the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 to provide targeted credit support to Micro, Small, and Medium Enterprises, Indian airlines and other stressed sectors to manage cash flow and continue operations.

Under the Emergency Credit Line Guarantee Scheme 5.0, the government will provide guarantee coverage of 100 per cent for MSMEs and 90 per cent for non-MSMEs as well as airline sector, to Member Lending Institutions (MLIs) by National Credit Guarantee Trustee Company Limited (NCGTC) for the amount in default under the additional credit facility extended to the eligible borrowers to tide over any short-term liquidity mismatches, against the backdrop of ongoing West Asia situation.

For the aviation sector, the scheme has specifically earmarked ₹5,000 crore for airlines. The scheme provides structured financial relief with a maximum loan limit of ₹1,000 crore per borrower, and an additional ₹500 crore subject to equivalent equity infusion by the borrower. The loans will have a tenure of up to 7 years, including a 2-year moratorium on repayment, thereby easing short-term liquidity pressures.

The introduction of ECLGS 5.0 aims to provide additional credit support to MSMEs and airlines during the current challenging period. The loan provides a seven-year repayment period which enables borrowers to convert 50 percent of their interest payments into a Funded Interest Term Loan (FITL) This arrangement will help businesses because it provides them with relief from immediate debt payments while it enhances their cash flow and financial resources.

Minister Ram Mohan Naidu said, "In the present scenario of unpredictable and unprecedented times, when airlines across the world are struggling with operations, Indian airlines have remained steady, supported by timely measures, be it capping of ATF prices amidst global surge, reduction in airport landing and parking charges, and now a bold decision has been taken by the Government. By approving the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0, airlines will be enabled to navigate short-term liquidity challenges and maintain seamless operations amid global disruptions. It will provide strong financial backing to safeguard jobs, sustain connectivity and ensure resilience across the aviation ecosystem, while also supporting MSMEs".

The Scheme will provide additional credit up to 20% of peak working capital utilised during Q4 FY 26, capped at Rs.100 crore. For airlines, up to 100%, capped at Rs 1,500 crore per borrower, subject to satisfying certain specific conditions. The maximum period of guarantee cover shall be co-terminus with the tenure of the loan. The Scheme would applya  to all loans sanctioned during the period from the date of issue of these guidelines by NCGTC upto 31.03.2027.

The scheme will also help mitigate the impact of rising Aviation Turbine Fuel (ATF) prices, exchange rate volatility and operational disruptions, which continue to affect the financial health of airlines. By enabling access to credit backed by sovereign guarantee, it will enhance lender confidence, improve credit flow to the sector and support operational stability. It is also expected to sustain employment, preserve sectoral capacity and help minimise the pass-through of increased costs to passengers, thereby supporting the continued growth and resilience of India’s aviation sector.