The Centre’s newly approved Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 could provide relief to nearly 1.1 crore MSME accounts while also offering targeted liquidity support to the aviation sector amid disruptions caused by the ongoing West Asia conflict, according to an SBI Research report.
The report estimates that around 45% of the country’s total MSME portfolio could become eligible under the latest version of the scheme. Eligible MSME borrowers may receive average additional credit flow of around ₹2 lakh to ₹2.3 lakh per account.
The report has been authored by Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India.
Additional credit flow
The Union Cabinet recently approved ECLGS 5.0 as a special liquidity support measure aimed at helping businesses tackle financial stress arising from geopolitical uncertainty, elevated fuel costs, and supply-chain disruptions linked to the Middle East conflict.
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According to the report, the government has targeted total additional credit flow of around ₹2.55 lakh crore under the scheme, including ₹5,000 crore specifically allocated for the aviation sector.
Existing standard MSMEs will receive 100% guarantee coverage, while eligible non-MSMEs, including airlines, will receive 90% guarantee support.
Under ECLGS 5.0, MSMEs can avail additional funding of up to 20% of peak working capital utilised during the fourth quarter of FY26, subject to a cap of ₹100 crore.
SBI Research said the timely intervention is expected to provide liquidity support, protect jobs, sustain supply chains, and strengthen the resilience of the Indian economy during a period of heightened global uncertainty.
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Biggest beneficiaries
The report highlighted that the aviation sector could emerge as one of the biggest beneficiaries of the scheme due to rising aviation turbine fuel (ATF) prices and pressure on passenger demand.
According to SBI Research, the impact of the Middle East conflict on airlines is twofold — a sharp increase in fuel costs and weaker passenger traffic caused by uncertainty and higher ticket prices.
ATF prices quoted by Indian Oil Corporation (IOC) in Mumbai for domestic routes have increased by nearly 35%, while price escalation across major metro cities ranges between 35% and 52%, the report said.
To address the stress, airlines will be eligible for additional credit support of up to 100% of peak working capital utilised during Q4 FY26, capped at ₹1,500 crore per borrower. The loans will carry a tenure of seven years, including a two-year moratorium period.
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Outstanding bank credit to the aviation sector stood at ₹526 billion as of March 2026, registering 14% year-on-year growth. SBI Research noted that the proposed ₹5,000 crore package for airlines would amount to nearly 9.5% of the sector’s total outstanding bank credit.
Earlier ECLGS phases
The report also highlighted the success of earlier ECLGS phases introduced during the pandemic. According to SBI Research, ECLGS 1.0 to 4.0 helped save at least 13.5 lakh MSME accounts from slipping into non-performing asset (NPA) status, including nearly 2 lakh restructured accounts.
The scheme also played a major role in preserving employment, with SBI Research estimating that nearly 1.5 crore jobs were protected because of the emergency credit support.
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MSME asset quality has also improved significantly over the last few years. The gross NPA ratio of the MSME sector declined sharply to 3.3% in September 2025 from 11% in March 2020.
The report further noted that MSME bank credit growth remained strong in FY26, rising by an estimated 27%, while MSMEs’ share in total bank credit increased to 18.5%.
