India's cabinet on Tuesday approved an emergency credit guarantee package designed to support businesses experiencing liquidity pressure linked to the Middle East crisis, the information minister said after a cabinet meeting.
The programme, named the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0, is valued at 181 billion rupees (about $1.9 billion). Under the scheme, the government will provide 100% guarantee coverage for small and medium enterprises and 90% coverage for other firms as well as for the airline sector, according to the government statement released after the meeting.
Guarantees under ECLGS 5.0 will be administered through the National Credit Guarantee Trustee Company Ltd., the statement said. The scheme is aimed at firms that have encountered liquidity stress due to disruptions originating from the Middle East, with textile and glass manufacturers cited as examples of industries affected by supply interruptions amid the U.S.-Israeli conflict with Iran.
India, described in the statement as the world’s third-largest oil importer, faces potential risks of higher inflation and slower economic growth as a result of the crisis. The government framed ECLGS 5.0 as a measure to help businesses sustain operations, preserve jobs and maintain supply chains affected by conflict-related disruptions.
The scheme will cover loans that member lending institutions extend to borrowers who had standard accounts and existing working capital limits or outstanding credit facilities as of March 31, 2026. Eligible borrowers may raise up to 20% of the peak working capital they used in the January-March quarter of fiscal 2026, with a maximum drawdown capped at 1 billion rupees per borrower.
Scheduled passenger airlines have different terms: they may borrow up to 100% of their outstanding credit facilities under the scheme, with a cap of 15 billion rupees per borrower, subject to specified conditions.
Tenors and moratoriums are set by borrower category. Loans extended to businesses under ECLGS 5.0 will have a five-year duration that includes a one-year moratorium. Loans to airlines will carry a seven-year tenor with a two-year moratorium.
The government is targeting a total credit flow of 255 billion rupees under the scheme, which includes a 5 billion-rupee allocation for airlines. ECLGS 5.0 will apply to loans sanctioned through March 31, 2027.
Contextual note: The government described the programme as temporary, targeted relief for companies that met the eligibility cut-off dates and have been affected by disruptions related to the Middle East crisis.