Cabinet Approves ECLGS 5.0; ₹5000 Crore Credit Support for Airlines Amid West Asia Disruptions
Scheme to provide sovereign-backed liquidity support to MSMEs and aviation sector facing operational stress
Civil aviation minister Ram Mohan Naidu said the decision reflects the government’s commitment to maintaining stability in the aviation ecosystem during global uncertainties.
New Delhi: The Union Cabinet on Wednesday approved the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 to provide additional liquidity support to MSMEs and Indian airlines facing financial stress due to the ongoing geopolitical situation in West Asia.
The decision was taken at a Cabinet meeting chaired by Prime Minister Narendra Modi.
Under the revised scheme, an additional credit flow of ₹2,55,000 crore will be facilitated, including a dedicated ₹5,000 crore allocation for the aviation sector. The move comes amid rising Aviation Turbine Fuel (ATF) prices, airspace closures, reduced international operations and lower aircraft utilisation, which have placed pressure on airline finances and liquidity.
The scheme will provide 100% credit guarantee coverage for MSMEs and 90% coverage for non-MSMEs and airlines through National Credit Guarantee Trustee Company Limited (NCGTC) to member lending institutions.
For airlines, the scheme allows loans of up to ₹1,000 crore per borrower, with an additional ₹500 crore available subject to equivalent equity infusion by the borrower. The loans will have a tenure of up to seven years, including a two-year moratorium on repayment.
The government said the longer repayment period and the provision to convert up to 50% of interest into a Funded Interest Term Loan (FITL) are aimed at easing immediate repayment burdens and improving cash flow management.
The scheme permits additional credit support of up to 20% of peak working capital utilised during Q4 FY26 for eligible borrowers, capped at ₹100 crore. For airlines, the limit can go up to ₹1,500 crore per borrower subject to specified conditions.
Civil aviation minister Ram Mohan Naidu said the decision reflects the government’s commitment to maintaining stability in the aviation ecosystem during global uncertainties.
“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,” he said.
The government said the scheme is expected to improve lender confidence through sovereign-backed guarantees, sustain employment, preserve sectoral capacity and reduce the pass-through impact of rising operational costs on passengers.
The scheme will apply to all eligible loans sanctioned from the date of issuance of guidelines by NCGTC till March 31, 2027.
