The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 to provide targeted financial relief to airlines and micro, small and medium enterprises (MSMEs) amid ongoing global disruptions.
The scheme aims to facilitate an additional credit flow of Rs 2.55 lakh crore, with Rs 5,000 crore specifically earmarked for the aviation sector, which is grappling with rising Aviation Turbine Fuel (ATF) prices, airspace restrictions and reduced international operations due to the West Asia situation.
Under ECLGS 5.0, the government will provide 100 per cent credit guarantee coverage for MSMEs and 90 per cent for non-MSMEs, including airlines, through the National Credit Guarantee Trustee Company Limited (NCGTC). This is expected to encourage lending institutions to extend additional credit to stressed borrowers.
The scheme allows airlines to access loans of up to Rs 1,000 crore per borrower, with an additional Rs 500 crore linked to equivalent equity infusion. The loans will have a tenure of up to seven years, including a two-year moratorium, providing relief from immediate repayment pressures.
Eligible borrowers can avail additional credit of up to 20 per cent of peak working capital utilisation during the fourth quarter of FY26, capped at Rs 100 crore. For airlines, the limit extends up to 100 per cent of existing exposure, capped at Rs 1,500 crore per borrower, subject to conditions.
Civil Aviation Minister Ram Mohan Naidu said the move would help airlines navigate liquidity challenges while sustaining operations and safeguarding jobs. He added that the scheme would strengthen the resilience of India’s aviation ecosystem amid volatile global conditions.
The scheme also introduces flexibility by allowing up to 50 per cent of interest to be converted into a Funded Interest Term Loan (FITL), further easing cash flow pressures on borrowers.
ECLGS 5.0 will be applicable to loans sanctioned until March 31, 2027, and is expected to enhance lender confidence, improve credit flow and stabilise operations across affected sectors. The government noted that the initiative would help mitigate the impact of fuel price volatility, currency fluctuations and operational disruptions, while supporting continued growth in the aviation sector.
Originally introduced during the Covid-19 pandemic, the ECLGS framework has been expanded to address emerging global challenges, reflecting the government’s focus on sustaining economic momentum and sectoral resilience. |
