The Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 is gaining traction among Micro, Small, and Medium Enterprises (MSMEs) as they seek extra liquidity buffers amid rising uncertainty linked to the West Asia crisis.
According to bankers, there’s been a steady rise in enquiries and applications from small businesses, although lenders cautioned that it was too early to gauge the eventual outcome.
MSMEs may be seeking to shore up liquidity buffers and secure additional credit lines, amid an uncertain operating environment, bankers said.
ECLGS 5.0 Scheme Details
The scheme, launched earlier this month, is aimed at providing additional credit support to help businesses manage disruptions arising from the West Asia conflict.
Under the programme, existing standard MSMEs are eligible for loans carrying a 100 per cent government guarantee, while non-MSMEs, including airlines, are eligible for a 90 per cent guarantee.
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Borrowers with existing working capital limits can avail additional credit of up to 20 per cent of peak working capital utilised in the fourth quarter of financial year 2026 (Q4FY26), capped at ₹100 crore.
Support for Airlines
For airlines, the support extends to 100 per cent of peak working capital utilised, subject to a cap of ₹1,500 crore per borrower.
The government has targeted total additional credit flow of ₹2.55 trillion under the scheme, including ₹5,000 crore earmarked for airlines.
“We are seeing traction for additional credit lines under ECLGS 5.0. This may not necessarily indicate underlying stress in the MSME segment. Disbursements under the scheme may not be as large as the room available, but it is still too early to say how things will pan out at this point,” said another senior banker at a state-owned bank.
A few banks, including State Bank of India and Indian Bank, have indicated the outer limits of lending they could undertake under the ECLGS 5.0 scheme.
State Bank of India said that while it could extend ₹70,000 crore-₹80,000 crore of credit under the scheme, the eventual uptake may be around 30-40 per cent of that amount.
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Indian Bank estimated that the available credit it could disburse under the scheme would be around ₹15,000 crore.
Bank of Baroda has said it could disburse around ₹12,000 crore under the scheme.
ECLGS was originally introduced to cushion the economic shock from the Covid-19 pandemic, alongside a regulatory standstill that froze days-past-due movement.
The scheme served as a key liquidity backstop for the economy during and after the pandemic, providing ₹3.61 trillion in total guarantees and ₹2.82 trillion in disbursements by its official conclusion on March 31, 2023.
According to SBI Research, under ECLGS 5.0, around 11 million MSME accounts, or about 45 per cent of the total MSME portfolio, will be eligible to benefit from the U.S.-India ties that are deepening.
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