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Cabinet Approves Rs 2.55 Lakh Crore Credit Support for Businesses Amid West Asia Crisis

The Union Cabinet approved the Emergency Credit Line Guarantee Scheme 5.0 to provide Rs 2.55 lakh crore in credit support. The scheme offers 100% credit guarantee for MSMEs and 90% for non-MSMEs and airlines. Additional credit is capped at 20% of peak working capital for MSMEs and 100% for airlines. The initiative aims to help businesses maintain operations, protect jobs, and sustain supply chains amid the West Asia crisis.

Key Points: Cabinet okays Rs 2.55 lakh crore credit for businesses

  • Cabinet approves Rs 2.55 lakh crore credit guarantee scheme
  • 100% guarantee for MSMEs, 90% for non-MSMEs & airlines
  • Additional credit up to 20% for MSMEs, 100% for airlines
  • Loans have 5-7 year tenor with moratorium
2 min read

Cabinet approves scheme to provide Rs 2.55 lakh crore credit support to businesses facing liquidity challenges amid West Asia crisis

Cabinet approves Rs 2.55 lakh crore Emergency Credit Line Guarantee Scheme 5.0 for MSMEs, non-MSMEs, and airlines hit by West Asia crisis.

"The scheme aims to enable businesses to tide over the challenges arising from the West Asia conflict - Union Cabinet"

New Delhi, May 5

The Union Cabinet on Tuesday approved Emergency Credit Line Guarantee Scheme 5.0 to provide additional credit support to businesses facing liquidity challenges due to the West Asia conflict. The scheme aims to enable a total additional credit flow of Rs 2,55,000 crore, including Rs 5,000 crore for the airline sector.

Under the scheme, the National Credit Guarantee Trustee Company Limited (NCGTC) will provide 100% credit guarantee coverage for MSMEs and 90% for non-MSMEs as well as the airline sector to Member Lending Institutions for the amount in default under the additional credit facility. "The scheme aims to provide credit guarantee coverage of 100% for MSMEs and 90% for non-MSMEs as well as airline sector," the Cabinet said.

The support is targeted at Micro, Small & Medium Enterprises (MSMEs) and non-MSMEs with existing working capital limits and scheduled passenger airlines with outstanding credit facilities as of March 31, 2026, provided their accounts are standard. The guarantee fee has been kept at nil to ensure easier access to credit, release said.

For MSMEs and non-MSMEs, the additional credit can go up to 20% of peak working capital utilised during Q4 FY26, capped at Rs 100 crore. For airlines, the support can be up to 100%, capped at Rs 1,500 crore per borrower, subject to specific conditions. "The quantum of support for airlines is up to 100% (capped at Rs.1,500 crore per borrower)," the release noted.

The tenor of the loan has been set at 5 years for MSMEs and non-MSMEs, including a moratorium of 1 year, while for the airline sector it is 7 years with a moratorium of 2 years. The scheme will be applicable to all loans sanctioned up to March 31, 2027.

The press release by the Union Cabinet said the scheme is designed to help businesses tide over short-term liquidity mismatches arising from the West Asia situation. "The scheme aims to enable businesses to tide over the challenges arising from the West Asia conflict," it stated, adding that it will also help businesses maintain operations, protect jobs and sustain supply chains.

The initiative is expected to ensure that additional working capital needs of MSMEs and the airline sector are met by banks and financial institutions. "By providing timely liquidity, the scheme will sustain the businesses and prevent job losses," the Cabinet noted.

It added that the measure will also promote uninterrupted domestic production and maintain the resilience of the ecosystem during the current geopolitical uncertainty.

- ANI

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Reader Comments

J
James A
Interesting approach. In the US, we saw similar emergency credit lines during COVID. The 5-year tenor with a 1-year moratorium seems reasonable for small businesses. I'm curious how the government will monitor whether this credit actually reaches the intended beneficiaries or gets stuck in the banking system.
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Ananya R
Great initiative but the timing feels a bit off. Why ₹2.55 lakh crore now when the West Asia crisis has been ongoing for months? Our family business in Kerala has been struggling since the first disruptions in shipping routes. And airlines getting ₹5,000 crore separately? Hope there's transparency on how this gets distributed. 🤔
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Kavya N
Finally some relief for the aviation sector! My brother works for an airlines and they've been cutting costs everywhere. The 7-year loan with 2-year moratorium gives them breathing room. But I'm worried about the MSME segment—20% of peak working capital from Q4 FY26? That's a backward-looking metric that might not capture current urgent needs.
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Siddharth J
The zero guarantee fee is a welcome move—it removes a major barrier for small businesses. But I hope the government also addresses the larger issue: why Indian exporters are so vulnerable to West Asia disruptions. We need to diversify our trade routes and reduce dependence on the Suez Canal. Band-aid solutions won't work long term.
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Priya S
My father runs a textile export business in Tirupur. The West Asia crisis has hit us hard—orders cancelled, shipping costs tripled. This scheme gives us hope. But the ₹100 crore cap for MSMEs? Most small businesses like ours need ₹10

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