New Delhi | As a timely intervention to provide additional credit facility (to enable businesses to tide over the challenges arising from the West Asia conflict), the Union Cabinet has approved Emergency Credit Line Guarantee Scheme (ECLGS) 5.0. Existing standard MSMEs (100% guarantee) and non-MSMEs (including airline sector 90% guarantee) with existing working capital limits are eligible for the scheme. The quantum of support is additional credit up to 20% of peak working capital utilised during Q4 FY26 (capped at Rs 100 crore). For airlines up to 100% (capped at Rs 1,500 crore per borrower). Government targeted total additional credit flow of Rs 2.55 lakh crore (including Rs 5,000 crore for airlines).
SBI Research had earlier indicated (in its exhaustive research dated 06-Jan-22) that post pandemic ECLGS is not only a scheme to shield MSMEs from the disruptions, it also improves the overall financial health of the MSMEs. The scheme has positive ramifications on multiple pivots (NPA and employment saving), encouraging exploring feasibility of similar structure to provide holistic support to MSME sector in anchoring the economy.
We expect ECLGS 5.0 has same positive ramifications. This timely intervention will ensure liquidity support, protect jobs, sustain supply chains, and strengthen the resilience of Indian economy. Our preliminary estimates indicate that ~1.1 crore MSME accounts (~45% of total MSME portfolio) will be eligible to get benefit from the scheme with per account an average additional credit flow of Rs 2 to 2.3 lakh).
The ECLGS 5.0 is particularly going to benefit the aviation sector. The impact of war in Middle East is twofold on aviation sector. First is the increase in cost of ATF, which on average accounts for 30-40% of the operating costs. Second is the impact on passenger traffic that has reduced due to greater uncertainty and higher prices. But depending upon the metro city, this escalation is in the range of 35% to 52%. In this context, the outstanding bank credit for aviation sector as of March 2026 is Rs 526 billion and it registered a growth of 14% yoy in March 2026. At full disbursement of Rs 5000 crore for the aviation sector the proposed measure will be 9.5% of Rs 526 billon.
Post the implementation of the ECLGS, bank credit to the MSME has risen sharply. In FY26, MSME credit grew by ~27% (estimated) and taking the share of MSME credit to 18.5% in total bank credit. Moreover, their asset quality remained sound with the gross NPA ratio showing further improvement.
ECLGS 5.0 TARGETS TOTAL ADDITIONAL CREDIT FLOW OF RS 2.55 LAKH CRORE Union Cabinet has approved Emergency Credit Line Guarantee Scheme (ECLGS) 5.0. Existing standard MSMEs (100% guarantee) and non-MSMEs (including airline sector 90% guarantee) with existing working cap ital limits are eligible for the scheme.
The quantum of support is additional credit up to 20% of peak working capital utilised during Q4 FY26 (capped at Rs 100 crore). For airlines up to 100% (capped at Rs 1,500 crore per borrower).
Launched first as a relief measure during COVID-19, ECLGS (1.0 to 4.0) is a huge success so far with 1.2 crore guarantees issued of Rs 3.7 lakh crore.
State-wise data indicate that while West Bengal re ceived most number of guarantees (in volume ~18%), Maharashtra topped the list in terms of value (14% share).
IMPACT OF ECLGS 1.0 TO 4.0 ECLGS is not only a scheme to shield MSMEs from the disruptions, it also improves the overall financial health of the MSMEs. Our earlier research results (SPECIAL REORT dated 06-Jan-22) for ECLGS (1.0 to 4.0) are several, going by the positive ramifications on multiple pivots, encouraging exploring feasibility of similar structure to provide holistic support to MSME sector in anchoring the economy.
As per the aforesaid research, at least 13.5 lakh MSMEs (93.7% of which are in Micro and Small cate gory) accounts were saved due to ECLG scheme (including the 2 lakh restructured accounts eligible for ECLG credit). In absolute terms, MSME loan accounts worth Rs 1.8 lakh crore (including Rs 12,000 crore of restructured) have improved during the period. This means that around 14% of the outstanding MSME credit (including 2% of restructured) has been saved from slipping into NPA because of the ECLG scheme. If such units slipped into NPA, then 1.5 crore workers would have become unemployed.
With the support of the ECLGS, the gross NPA of MSME declined to 3.3% in Sep’25, compared to 11.0% in March 2020.
IMPACT OF ECLGS 5.0
Though, it is too early to said about the expected re sults of the ECLGS 5.0, however, based on the earlier experiences, overall the schemes seems reasonably credible, proactive and sufficient to tide over the tran sient West Asia crisis. Further, the timely intervention will ensure liquidity support, protect jobs, sustain sup ply chains, and strengthen the resilience of Indian economy.
Still our preliminary estimates indicate that ~1.1 crore MSME accounts (45% of total MSME portfolio) are eligible to get benefit from the scheme with per account on an average additional credit flow of (Rs 2 to 2.3 lakh).
