`35,000 crore credit lifeline extended to crisis-hit MSMEs

LIQUIDITY BOOST DELIVERED

Lenders accelerate support for affected businesses

PTI

New Delhi

Banks have sanctioned ₹35,000 crore loans under the Emergency Credit Line Guarantee Scheme (ECLGS) to Micro, Small and Medium Enterprises (MSMEs) and industries impacted by the West Asia conflict.

The scheme, approved by the Union Cabinet on May 5, aimed at providing additional credit flow of ₹2.55 lakh crore, including ₹5,000 crore for airlines hit by the ongoing geopolitical crisis. Lenders have cleared about 80,000 applications with loans amounting to ₹35,194 crore, and guarantees worth ₹15,720 crore have been issued as of May 29, Department of Financial Services Joint Secretary Manoj Muttathil Ayyappan told reporters here. 

"Since we have reached a good number, it is expected that the customers would benefit from the scheme," Ayyappan said, adding that the entire process is digital and end-to-end can be completed in five to seven days. "The scheme is made generally liberal, ensuring that maximum beneficiaries are able to avail the benefits. Only customers who are SMA 2 as of March 31, 2026, are kept outside the scheme," he said. He also said that the outreach programme is being carried out across the country so that maximum benefit can be provided. 

The ECLGS 5.0, having an outlay of ₹18,100 crore, would help airlines and MSMEs impacted by the crisis. Passenger airlines would be eligible for up to 100% of peak credit up to ₹1,500 crore, while institutions can access up to 20% of fund-based working capital up to ₹100 crore. The objective of the scheme is to provide timely liquidity to sustain the businesses and prevent job losses. It will also promote uninterrupted domestic production and maintain the resilience of the ecosystem. As per the scheme, the banks can provide an additional 20% credit over their existing working capital. 

The scheme aims to provide credit guarantee coverage of 100% for MSMEs and 90% for non-MSMEs to Member Lending Institutions (MLIs) by National Credit Guarantee Trustee Company Limited (NCGTC) for the amount in default under the additional credit facility extended to the eligible borrowers to tide over any short-term liquidity mismatches. The tenor for the airline sector would be seven years from the date of first disbursement, including a moratorium of two years, and for MSMEs and non-MSMEs, it would be five years from the date of first disbursement, including one year of moratorium. 

MSMEs and airlines have been facing substantial financial headwinds due to the West Asia conflict that started in February. ECLGS was first launched in May 2020 to mitigate economic distress during the Covid pandemic.