Cabinet clears ECLGS 5.0 boost unlocking ₹2.55 lakh crore credit, ₹5,000 crore lifeline for airlines

THEBUSINESSBYTES BUREAU

NEW DELHI, MAY 6, 2026

In a decisive move to stabilise key sectors amid global turbulence, the Union Cabinet chaired by Prime Minister Narendra Modi has approved the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0, aimed at extending targeted financial support to MSMEs and the aviation sector.

The scheme comes against the backdrop of mounting financial stress on airlines due to a sharp rise in Aviation Turbine Fuel (ATF) prices, compounded by airspace closures and reduced international operations. These challenges have significantly impacted aircraft utilisation and strained liquidity across the sector.

Under ECLGS 5.0, the government has approved an additional credit flow of ₹2,55,000 crore, with a dedicated ₹5,000 crore allocation for airlines. The scheme provides credit guarantee coverage of 100% for MSMEs and 90% for non-MSMEs and airlines, to Member Lending Institutions through the National Credit Guarantee Trustee Company Limited (NCGTC).

For the aviation sector, the package offers structured relief with a maximum loan limit of ₹1,000 crore per borrower, along with an additional ₹500 crore subject to equivalent equity infusion. Loans will carry a tenure of up to seven years, including a two-year moratorium, providing much-needed breathing space to manage short-term liquidity pressures.

The scheme also allows borrowers to convert up to 50 per cent of interest into a Funded Interest Term Loan (FITL), easing repayment burdens and improving cash flow management. Additionally, eligible borrowers can access credit of up to 20 per cent of peak working capital utilised during Q4 FY26, capped at ₹100 crore, while airlines can avail up to 100 per cent, capped at ₹1,500 crore per borrower, subject to specific conditions.

Commenting on the development, Civil Aviation Minister Ram Mohan Naidu said, "Under the decisive leadership of Hon’ble Prime Minister Narendra Modi Ji, India’s aviation growth story today stands out globally as a success story built on the foundation of reforms, resilience and resurgence. And 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 guarantee cover under the scheme will be co-terminus with the loan tenure, and will apply to loans sanctioned from the date of issuance of guidelines by NCGTC up to March 31, 2027.

By addressing challenges such as rising ATF costs, exchange rate volatility, and operational disruptions, the scheme is expected to enhance lender confidence, improve credit flow, and ensure operational stability in the aviation sector. It is also likely to safeguard employment, preserve capacity, and minimise the pass-through of increased costs to passengers — reinforcing the continued growth trajectory of India’s aviation industry.