ECLGS 5.0 support for MSMEs to last only for the allocated guarantee cover
The National Credit Guarantee Trustee Company has informed banks that the ECLGS 5.0 scheme will cease once the ₹2.5 lakh crore guarantee limit is reached. Priority for remaining funds is now strictly reserved for MSMEs, with non-MSME loan processing halted.
Why it matters
This policy shift impacts the liquidity and financial stability of small businesses relying on government-backed credit during economic uncertainty.
The National Credit Guarantee Trustee Company (NCGTC) has informed banks that the Emergency Credit Linked Guarantee Scheme (ECLGS) 5.0, which was announced in May this year to support MSMEs and non-MSMEs affected by the West Asia war, will be implemented only as long as the ₹2.5 lakh crore guarantee cover is reached.
All its member lending institutions have been asked to sanction loans under the ECLGS 5.0 to MSMEs and non-MSMEs and apply for credit guarantee under the scheme as it will be considered on first come first served basis subject the availability of guarantee cover. “Any sanction beyond available guarantee cover shall not be admissible under the scheme”, it told the banks in a communication dated August 18, 2026.
The credit guarantees issued to MSMEs and non-MSMEs (except domestic airlines) will not exceed ₹2.5 lakh crore, it pointed out.
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