Govt clears ₹2.55 lakh crore loan scheme to ease stress from West Asia crisis; CNBC-TV18 newsbreak confirmed

CNBC-TV18, earlier today, reported citing sources that the Union Cabinet was likely to consider a revamped Emergency Credit Line Guarantee Scheme (ECLGS). The official announcement has now been made, confirming the newsbreak.

The Union Cabinet has approved Emergency Credit Line Guarantee Scheme (ECLGS) 5.0, aimed at expanding credit support to businesses amid emerging external risks, including the ongoing West Asia crisis.

The proposed framework is expected to extend credit guarantee support across a wider set of sectors, marking a broader coverage compared with earlier iterations of the scheme that were largely targeted at specific stressed segments during the pandemic period.

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Sources had earlier indicated that the overall credit guarantee envelope under

the new ECLGS may be in the range of ₹2.25 lakh crore to ₹2.50 lakh crore. The final approved outlay, however, stands higher at ₹2.55 lakh crore.

The scheme is also expected to include sector-wise sub-limits to ensure calibrated allocation of guarantees across industries.

The government had been working on designing a fresh ECLGS-type intervention in the context of emerging external risks, including geopolitical tensions in West Asia, which have contributed to volatility in global trade, energy prices, and supply chains.

While the proposal was on the Cabinet agenda earlier, it has now received approval, broadly in line with expectations.

Cabinet clears ECLGS 5.0; targets ₹2.55 lakh crore credit flow

The Union Cabinet has approved ECLGS 5.0 to provide credit guarantee coverage through the National Credit Guarantee Trustee Company Limited (NCGTC) to member lending institutions for extending additional credit support to eligible borrowers.

The scheme targets a total additional credit flow of ₹2,55,000 crore, including ₹5,000 crore earmarked for the airline sector. It offers 100% guarantee coverage for MSMEs and 90% for non-MSMEs and airlines, with support aimed at addressing liquidity stress arising from the West Asia situation.

Eligible borrowers include MSMEs, non-MSMEs and scheduled passenger airlines with standard accounts as of March 31, 2026. The scheme will remain in force for loans sanctioned till March 31, 2027, with loan tenures of up to five years (seven years for airlines), including moratorium benefits.

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