West Asia conflict: Govt announces credit line guarantee scheme for airlines, MSMEs

New Delhi: The government on Tuesday announced an Emergency Credit Line Guarantee Scheme (ECLGS) with an outlay of Rs 18,100 crore to provide relief for MSMEs and airlines impacted by the West Asia conflict.

The scheme expected to help in providing additional credit flow of Rs 2.55 lakh crore, including Rs 5,000 crore for airlines was approved by the Union Cabinet on Tuesday.

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Briefing the media on the Cabinet decisions, Information and Broadcasting Minister Ashwini Vaishnaw said the ECLGS 5.0, having an outlay of Rs 18,100 crore, would help airlines as well as MSMEs impacted by the West Asia crisis.

"The scheme has been brought to address the stress in MSME and airline sectors due to the West Asia conflict," he said.

According to the minister, passenger airlines would be eligible for up to 100 percent of peak credit up to Rs 1,500 crore while institutions can access up to 20 percent of fund-based working capital up to Rs 100 crore.

In an official release, the government said the scheme aims to enable businesses to tide over the challenges arising from the West Asia conflict.

"Additionally, this is expected to help businesses maintain their operations, protect jobs, and sustain supply chains. The proposed credit guarantee scheme is a major step to help businesses, particularly MSMEs and airline sector, to ensure their additional working capital needs are catered by the banks and financial institutions," it said.

By providing timely liquidity, the government said the scheme would sustain the businesses and prevent job losses. It will also promote uninterrupted domestic production and maintain the resilience of the ecosystem.

"The scheme aims to provide credit guarantee coverage of 100 percent for MSMEs and 90 percent for non-MSMEs as well as airline sector, to Member Lending Institutions (MLIs) by National Credit Guarantee Trustee Company Limited (NCGTC) for the amount in default under the additional credit facility extended to the eligible borrowers to tide over any short-term liquidity mismatches in view of West Asia crisis," the release said.

There will be conditions for availing the loans. The tenor for the airline sector would be seven years from the date of first disbursement, including a moratorium of two years, and for MSMEs and non-MSMEs, it would be five years from the date of first disbursement, including one year of moratorium.

The scheme would be applicable to all loans sanctioned during the period from the date of issue of these guidelines by NCGTC up to March 31, 2027.

Civil Aviation Minister K Rammohan Naidu said the ECLGS was a very imperative initiative, especially for the aviation sector, enabling airlines to navigate short-term liquidity challenges and maintain seamless operations amid global disruptions.

"It will provide strong financial backing to safeguard jobs, sustain connectivity, and ensure resilience across the aviation ecosystem, while also supporting MSMEs," he said in a post on X.

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MSMEs (Micro, Small and Medium Enterprises) as well as airlines have been facing substantial financial headwinds due to the West Asia conflict that started in February.

ECLGS was first launched in May 2020 to mitigate economic distress during the coronavirus pandemic.

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