Govt Approves ₹2.5 Lakh Crore Loan Scheme to Counter West Asia Crisis Impact
India launches a massive loan program to aid businesses amid global disruption.
Top Summary
- What happened: The Modi government has approved a ₹2.5 lakh crore loan facility to help businesses cope with the economic fallout from the West Asia crisis.
- Why it matters: The crisis has disrupted supply chains, increased freight rates, and raised input costs, straining businesses' finances.
- What changes for people: Businesses can access additional credit up to 20% of their peak working capital, while airlines can get up to 100%, subject to certain limits.
- Who is affected: MSMEs, airlines, and other companies facing financial strain due to the West Asia crisis will benefit from this scheme.
Addressing Economic Challenges
The government is stepping in to mitigate the economic consequences of the ongoing West Asia crisis.
The newly approved loan facility aims to provide additional funding to businesses grappling with increased costs and extended payment cycles.
ECLGS 5.0 Details
The Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 mirrors the successful Covid-era strategy.
It offers 100% credit guarantee coverage for MSMEs and 90% for other companies, including airlines.
National Credit Guarantee Trustee Co Ltd will guarantee the amounts in default.
Loan Terms and Conditions
Companies, excluding airlines, have up to five years to repay the loan, including a one-year moratorium on principal payments.
Airlines have a repayment tenure of up to seven years.
The scheme is open to entities with existing bank loans classified as "standard" as of March 2026.
Financial Outlay and Scope
I&B Minister Ashwini Vaishnaw announced that ECLGS 5.0 has an outlay of ₹18,100 crore.
Guarantee fees have been waived to encourage participation.
The scheme will remain open until March 31, signaling a long-term approach to managing the crisis.
Specific Limits and Eligibility
Businesses can access additional credit up to 20% of their peak working capital used during the fourth quarter of last year, capped at ₹100 crore.
Airlines can access up to 100% of their working capital, with a limit of ₹1,500 crore per borrower.
PM Narendra Modi tweeted, “The ECLGS 5.0 approved by the Cabinet reflects our commitment to supporting India’s businesses, especially the MSME sector in challenging global times. By enabling additional credit flow with strong guarantee coverage, this initiative will help a wide range of sectors. Our focus remains on empowering enterprises, sustaining growth momentum and safeguarding livelihoods.”
What to Watch Next
The effectiveness of ECLGS 5.0 in mitigating the crisis's impact on Indian businesses will be closely monitored. The government's response to evolving global challenges and its impact on the Indian economy remains crucial.