In May 2026, the Union Cabinet cleared ECLGS 5.0 scheme to help businesses hit by the West Asia crisis. Rather than lending directly, the government has decided — guarantee the loans, covering 100% of a defaulting MSME's dues and 90% for non-MSMEs and airlines. This lets banks and NBFCs extend fresh working capital without demanding fresh collateral.
To qualify, the MSME must have an existing fund-based working capital limit from a member institution/lender as on 31 March 2026, with that account rated "Standard" (not SMA-2) on the same date. All MSME sectors are covered,
The government is guaranteeing a total credit flow of ₹2,55,000 crore. An individual MSME can draw up to 20% of its peak working capital outstanding in Q4 FY26 (January–March 2026), capped at ₹100 crore.
The terms are MSME friendly: no guarantee fee, no processing fee, and no pre-payment penalty. Interest is capped at 9% a year for MSMEs borrowing from banks, and 13% from NBFCs. MSMEs get a five-year tenor with a one-year moratorium on principal (interest is still serviced as it falls due). If you run a compliant MSME with an existing working capital line, it's worth a call to your lender before the corpus runs dry.
Source: NCGTC ECLGS 5.0 Operational Guidelines dated 08.05.2026; official implementation data as of 29 May 2026.