The central government’s Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 is to hugely benefit India’s MSME sector, with over 1.1 crore eligible accounts, or 45% of the total MSME portfolio, able to receive up to ₹2.3 lakh as additional credit flow, according to a report by SBI Research. 

Notably, the scheme is particularly beneficial to the aviation sector, as the impact on the sector is twofold amid the West Asia war. 

“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%,” the report said. 

“In this context, the outstanding bank credit for the aviation sector as of March 2026 is ₹52,600 crore, and it registered growth of 14% YoY in March 2026. At full disbursement of ₹5,000 crore for the aviation sector, the proposed measure will be 9.5% of ₹52,600 crore,” it added. 

What is Emergency Credit Line Guarantee Scheme? 

The Union government on Tuesday approved the ECLGS 5.0, aimed at supporting existing standard MSMEs and select non-MSME sectors, including airlines, with extra working capital support. 

“The introduction of ECLGS 5.0 aims to provide additional credit support to MSMEs and airlines during the current challenging period. The longer 7-year loan tenure, along with the option to convert up to 50% of interest into a Funded Interest Term Loan (FITL), is expected to ease immediate repayment pressure and improve cash flows and liquidity,” read the official announcement. 

The scheme allows eligible borrowers to access additional credit of up to 20% of their peak working capital utilisation in Q4FY26, with a cap of ₹100 crore. For airlines, the limit is higher, permitting borrowing of up to ₹1,500 crore per borrower, subject to specified conditions. The guarantee cover will remain aligned with the tenure of the loan. The scheme will apply to loans sanctioned from the date of notification by NCGTC until March 31, 2027. 

For the aviation sector, ₹5,000 crore has been earmarked. Airlines can avail loans of up to ₹1,000 crore, with an additional ₹500 crore linked to equivalent equity infusion by the borrower. These loans will have a tenure of up to seven years, including a two-year moratorium, aimed at easing liquidity pressures. 

How is the govt saving India’s MSMEs during a time of crisis? 

The West Asia conflict directly impacted the Indian economy, where MSMEs, the backbone of the country's economy, were impacted the most. However, according to experts, this scheme is a timely intervention by the government to safeguard India’s MSMEs in a time of crisis. 

SBI Research said earlier versions of the ECLGS, rolled out during the Covid-19 pandemic, played a crucial role in stabilising MSMEs and strengthening their balance sheets. 

The report said that these measures helped prevent around 13.5 lakh MSME accounts from turning into non-performing assets (NPAs). As a result, gross NPAs in the MSME segment declined sharply to 3.3% in September 2025 from 11% in March 2020. 

SBI Research also flagged strong momentum in MSME lending, estimating credit growth of about 27% in FY26, which increased the sector’s share in total bank credit to 18.5%. On the aviation front, the report said the proposed ₹5,000 crore allocation, if fully utilised, would account for nearly 9.5% of the sector’s outstanding bank credit.