The newly approved Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 is expected to benefit nearly 1.1 crore MSME accounts by providing additional credit support to businesses impacted by the ongoing West Asia conflict, according to a report by the State Bank of India (SBI).
Key Highlights of ECLGS 5.0
The Union Cabinet approved ECLGS 5.0 on Tuesday to offer extra working capital support to existing standard MSMEs and select non-MSME sectors, including airlines. According to the SBI report, preliminary estimates indicate that approximately 1.1 crore MSME accounts, representing around 45 per cent of the total MSME portfolio, will be eligible to benefit from the scheme. The average additional credit flow per account is estimated at Rs 2 to 2.3 lakh.
Under ECLGS 5.0, eligible borrowers can avail additional credit of up to 20 per cent of the peak working capital utilised during the fourth quarter of FY26, with a cap of Rs 100 crore. For airlines, the support can go up to 100 per cent of eligible credit, capped at Rs 1,500 crore per borrower.
Overall Credit Flow Target
The government has targeted an overall additional credit flow of Rs 2.55 lakh crore under the scheme, including Rs 5,000 crore earmarked for the aviation sector. The report highlighted that the timely intervention will ensure liquidity support, protect jobs, sustain supply chains, and strengthen the resilience of the Indian economy.
SBI Research noted that previous versions of the ECLGS scheme, introduced during the Covid-19 pandemic, played a key role in stabilising MSMEs and improving their financial health. Earlier schemes helped prevent at least 13.5 lakh MSME accounts from slipping into non-performing asset (NPA) status.
Impact on MSME NPA Levels
The report also stated that MSME gross NPAs declined sharply to 3.3 per cent in September 2025 from 11 per cent in March 2020, supported by measures such as ECLGS. The aviation industry is also expected to benefit significantly under ECLGS 5.0 amid rising aviation turbine fuel (ATF) prices and pressure on passenger traffic due to geopolitical tensions in West Asia.
SBI Research said outstanding bank credit to the aviation sector stood at Rs 526 billion as of March 2026, marking a 14 per cent year-on-year increase. If the full Rs 5,000 crore allocation for aviation is disbursed, it would account for nearly 9.5 per cent of the sector’s outstanding bank credit.
MSME Credit Growth
SBI Research further highlighted strong MSME credit growth during FY26, estimating that MSME credit expanded by around 27 per cent. This pushed the sector’s share in total bank credit to 18.5 per cent, the report added.
