The government expects businesses to secure loans worth around ₹2 lakh crore under the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 in the current financial year, as companies seek to build liquidity buffers amid uncertainties linked to West Asia geopolitical disruptions.
ECLGS 5.0, which carries a total government guarantee cover of ₹2.55 lakh crore, will remain open for loan sanctions until March 31, 2027.
Under the scheme, banks and financial institutions are permitted to extend additional credit facilities to eligible borrowers backed by sovereign guarantees, ensuring easier access to emergency funding.
According to a report by Moneycontrol, many businesses are not immediately drawing down the full sanctioned amounts but are instead securing access to credit as a precautionary measure.
“Many businesses want to keep a liquidity line available as a precaution. They may not draw down the entire amount immediately, but they want access to credit if the need arises,” a government source was cited as saying.
The scheme, which was approved by the Union Cabinet in May, is designed to cushion businesses against potential economic disruptions arising from geopolitical tensions in West Asia.
It aims to ensure that companies, particularly small and medium enterprises, have access to working capital support during uncertain conditions.
Under ECLGS 5.0, Micro, Small and Medium Enterprises (MSMEs) are eligible for 100 percent government guarantee coverage on approved loans.
Non-MSME borrowers, including airlines, are eligible for 90 percent guarantee coverage through the National Credit Guarantee Trustee Company (NCGTC).
Early data suggests strong demand for the scheme. So far, 1.41 lakh applications have been received, and over 1.06 lakh guarantees worth ₹48,484 crore have already been issued.
MSMEs account for about 96 percent of the total guarantees by number and 86 percent by value, highlighting their dependence on the scheme for liquidity support.
Public sector banks dominate the implementation, accounting for 96 percent of all guarantees issued.
Officials noted that sanctioned credit lines are significantly higher than actual disbursements, as businesses are treating the facility as a financial safety net.
While credit demand is strong, actual borrowing depends on individual requirements rather than immediate liquidity stress.
The government believes that, despite concerns related to West Asia, broader economic indicators remain stable.
Businesses, therefore, are not facing a severe cash crunch but are instead prioritising financial flexibility and risk management through access to guaranteed credit lines.
