What is Emergency Credit Line Guarantee Scheme? ECLGS 5.0 Explained

The Emergency Credit Line Guarantee Scheme is a government-backed credit guarantee programme designed to help businesses access additional working capital during periods of economic stress. First introduced during the COVID-19 pandemic, the scheme has evolved through several phases. The Government approved its latest version, ECLGS 5.0, to help enterprises cope with disruptions arising from ongoing geopolitical developments. Here is a complete breakdown of what the scheme is, its evolution, and everything you need to know about ECLGS 5.0.

What is the Emergency Credit Line Guarantee Scheme?

Launched in 2020 under the Aatmanirbhar Bharat Package, Emergency Credit Line Guarantee Scheme (ECLGS) seeks to help businesses overcome the financial stress caused by the COVID-19 pandemic. Under the ECLGS scheme, Member Lending Institutions (MLIs), including banks and financial institutions, were permitted to extend additional credit to eligible borrowers, backed by a 100% Government guarantee.

The scheme is implemented by the National Credit Guarantee Trustee Company (NCGTC), which provides government-backed credit guarantees to lending institutions so they can extend additional working capital to eligible borrowers with reduced credit risk.

Evolution of ECLGS: From 1.0 to 4.0

Since its launch, ECLGS has evolved through multiple phases to address the changing needs of different sectors:

ECLGS 1.0 covered Micro, Small and Medium Enterprises (MSMEs), business enterprises, Mudra borrowers and individual business loans, with eligibility limited to borrowers having outstanding loans not exceeding ₹50 crore and days past due of up to 60 days as on 29th February 2020.
ECLGS 2.0 expanded coverage to 26 stressed sectors identified by the Kamath Committee and the healthcare sector, covering borrowers with outstanding loans above ₹50 crore and up to ₹500 crore.
ECLGS 3.0 extended support to the hospitality, travel and tourism, leisure and sporting, and civil aviation sectors.
ECLGS 4.0 focused on strengthening healthcare infrastructure during the pandemic, covering hospitals, nursing homes, clinics, medical colleges and manufacturers of liquid oxygen and oxygen cylinders.

Together, ECLGS 1.0 to 4.0 resulted in 1.19 crore guarantees being issued, amounting to ₹3.68 lakh crores, before the schemes concluded on 31st March 2023.

Emergency Credit Line Guarantee Scheme Launch Date for ECLGS 5.0

In response to evolving geopolitical developments that can affect supply chains, raise logistics costs and create liquidity pressures for businesses, the Government approved the Emergency Credit Line Guarantee Scheme 5.0 on 5th May 2026. The scheme aims to facilitate additional credit flow of up to ₹2.55 lakh crore and is operational until 31st March 2027, or until the full guarantee amount is issued, whichever comes first.

Like its predecessors, ECLGS 5.0 is implemented by NCGTC, with borrowers accessing the scheme digitally through the Jan Samarth Portal.

Who Does ECLGS 5.0 Cover?

ECLGS 5.0 provides credit guarantee support to three categories of borrowers:

MSMEs across all sectors
Eligible non-MSME business borrowers, excluding certain specified sectors
Scheduled passenger airline companies

ECLGS 5.0 Eligibility Criteria for MSMEs and Non-MSMEs

Under the ECLGS 5.0 eligibility criteria, borrowers must have had existing working capital facilities from an MLI as on 31st March 2026, with loan repayments not overdue by more than 60 days. Borrowers who have already availed additional credit under the Credit Guarantee Scheme for Exporters (CGSE) are not eligible under ECLGS 5.0 up to the amount already availed under CGSE.

While the scheme covers MSMEs across all sectors, certain sectors are excluded for eligible non-MSME borrowers, including:

Non-Banking Financial Companies (NBFCs)
Power (generation, transmission and distribution)
Telecom service providers
Sugar and ethanol
Information technology companies
Paper and paper products
Educational institutions
Beverages (excluding tea and coffee) and tobacco

Where a borrower operates in both eligible and ineligible sectors, the lending institution determines eligibility based on the proportion of turnover generated from eligible sectors during FY 2025-26.

Credit Guarantee Coverage and Fees

The ECLGS 5.0 Scheme provides the following:

100% guarantee for loans extended to eligible MSMEs
90% guarantee coverage for eligible non-MSMEs
No guarantee fee is payable by MLIs under the scheme

Additional Credit Support

Eligible MSME and non-MSME borrowers can access additional credit of up to 20% of the peak fund-based working capital outstanding during the fourth quarter of FY 2025-26, subject to a ceiling of ₹100 crore per borrower.

ECLGS 5.0 Scheme Rate of Interest

The ECLGS 5.0 scheme rate of interest is regulated to ensure loans remain affordable:

For MSMEs, the interest rate is based on the External Benchmark Lending Rate (EBLR), the benchmark rate set by the Reserve Bank of India (RBI) for floating rates on eligible retail and micro and small enterprise loans.
For eligible non-MSMEs, the rate is based on the Marginal Cost of Funds-based Lending Rate (MCLR), an internal reference rate fixed under RBI guidelines that helps banks determine the minimum interest rate on different types of loans.

In both cases, lending institutions may charge up to 0.75% above the benchmark, subject to an overall ceiling of 9% per annum. For loans extended by eligible NBFCs, the interest rate cannot exceed 13% per annum.

Loan Tenure

Loans under ECLGS 5.0 for MSMEs and eligible non-MSMEs carry a 5-year tenure from the date of first disbursement, including a 1-year moratorium.

ECLGS 5.0 for Scheduled Passenger Airlines

The scheme also extends support to the aviation sector:

Eligibility: Airlines must have had outstanding fund-based and non-fund-based credit facilities from MLIs as on 31 March 2026, classified as 'Standard' (excluding SMA-2) on the same date.
Guarantee coverage: 90% credit guarantee, with no guarantee fee payable by MLIs.
Additional credit support: Up to 100% additional credit, subject to a ceiling of ₹1,500 crore per borrower. Any amount beyond ₹1,000 crore and up to ₹1,500 crore is permitted only with a proportionate equity contribution from promoters or owners.
Interest rate: Determined by the lending institution as per its Board-approved policy.
Loan tenure: 7 years from the date of first disbursement, including a 2-year moratorium.

How to Apply for ECLGS 5.0

Eligible borrowers can access ECLGS 5.0 through the Jan Samarth Portal, the Government's unified digital platform for credit-linked government schemes. Credit assistance under the scheme is provided through Scheduled Commercial Banks, Scheduled Urban Co-operative Banks, Financial Institutions and eligible Non-Banking Financial Companies registered as Member Lending Institutions.