Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 — NCGTC Operational Guidelines

100%
Guarantee Cover On Default For MSMEs — 90% Non-MSME & Airline
20%
Of Peak Q4 FY 2025-26 Fund-Based Working Capital
₹100 Cr
Maximum Loan Per Borrower — ₹1,500 Crore For Airlines
Nil
Guarantee Fee, Processing Fee And Pre-payment Penalty
Share:

Video Explanation & Insights

Overview

What ECLGS 5.0 Is, and Who It Actually Protects

Source: This page decodes the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 — Operational Guidelines, updated as of 08 May 2026, issued by the National Credit Guarantee Trustee Company Limited (NCGTC), a wholly owned company of the Department of Financial Services, Ministry of Finance, acting as Trustee. Every rate, cap, date, exclusion and obligation below is drawn strictly from that document, with the clause reference shown. The guidelines state their own purpose plainly: credit guarantee coverage to Member Lending Institutions for the default amount under additional credit facilities extended to eligible borrowers, to tide over short-term liquidity mismatches in view of the West Asia crisis. The scheme was approved by the Union Cabinet on 05 May 2026. NCGTC's own note at clause 21 applies: read these guidelines together with the FAQs uploaded on the website from time to time.
Live window (as at 25 July 2026) — but it is a race against a fixed corpus, not just a calendar. Clause 5 sets two independent end-points: sanctions are open up to 31.03.2027 or until guarantees for ₹2,55,000 crore are issued, whichever is earlier. The second condition is the one that will bind first if uptake holds. Press reporting in the weeks after launch put applications at around 2.62 lakh with roughly ₹35,000 crore sanctioned, of which about ₹30,355 crore had gone to MSMEs — those are press figures, not an NCGTC publication, and should be treated as directional only. The advisory point stands regardless: a client who is eligible today and waits until Q4 FY 2026-27 to approach the branch is exposed to corpus exhaustion, not merely to a deadline. Separately, note that eligibility itself is frozen at 31.03.2026 — the pool of eligible borrowers cannot grow, so a business that opened its working capital limit after that date can never qualify, however long the window stays open.

ECLGS 5.0 does not give a business money. It gives the lender a guarantee, and that guarantee is what persuades the lender to advance additional credit it might otherwise decline. NCGTC, as Trustee, covers 100% of the amount in default for MSMEs and 90% for non-MSMEs and the airline sector (clause 6c). The borrower receives an additional working capital term loan, operated as a separate loan account from the existing facility (clause 4-ii).

What “Amount in Default” Means — and Why the Definition Caps the Bank's Claim

Clause 4-i defines it as the principal and interest outstanding in the borrower's account in respect of the term loan or working capital term loan facility, as on the date the account became NPA, or on the date of lodgment of the claim application, whichever is lower. The “whichever is lower” is deliberate: a lender that delays lodging a claim while interest accrues cannot inflate the guaranteed amount, and one that recovers something in the interim cannot claim the higher pre-recovery figure.

The single most common client misconception — and it is expensive. A 100% guarantee does not mean the borrower's debt is written off if the account defaults. Clause 14(g) is explicit: payment of the guarantee claim by NCGTC “does not in any way take away the responsibility of the lending institution to recover the entire outstanding amount of the credit from the borrower” — the MLI must maintain full recourse and initiate all recovery action. Clause 16(a) reinforces it: NCGTC exercises no subrogation rights, and recovery, takeover of assets and sale of assets remain entirely the lender's responsibility. So the guarantee transfers credit risk from the bank to the Government; it does not extinguish the borrower's liability by a rupee. Any client who hears “100% guaranteed” and treats the facility as soft money should be corrected in writing at the sanction stage.
Which lenders can extend it. Member Lending Institutions under clause 4-iv are Scheduled Commercial Banks, Scheduled Urban Co-operative Banks (SUCBs), NBFCs registered with RBI, and Financial Institutions as defined in Section 45-I(i) of the RBI Act, 1934. The facility comes from the institution where the borrower's existing working capital limit sits — there is no separate government portal for the borrower to approach, and no fresh lender to onboard.
Eligible Borrower

Four Tests, Two Cut-off Dates, and One Exclusion List

TestRequirement (clause 4-iii, 15)
Existing facilityAll business enterprises, including MSMEs, having fund-based working capital limits from an MLI as on 31.03.2026.
Asset classificationCredit facilities classified as 'standard', excluding SMA-2, as on 31.03.2026.
No CGSE overlapBorrowers who have availed additional credit under the Credit Guarantee Scheme for Exporters (CGSE) are not eligible under this scheme up to the limit already availed under CGSE.
Sector (non-MSME only)Non-MSMEs in the sectors listed at Annexure-A are excluded from the scheme.
Status at sanction / disbursementAn otherwise-eligible borrower must not be an NPA with any lender as on the date of sanction and disbursement under the scheme (clause 15).

The Eight Excluded Sectors — Annexure-A

Non-Banking Financial Companies · Power (generation, transmission and distribution) · Telecom · Sugar & Ethanol · Information Technology · Paper & Paper products · Educational Institutions · Beverages (excluding tea and coffee) and Tobacco.

Read the Annexure-A heading carefully — it is a non-MSME exclusion, not a blanket one. The Annexure is titled “List of sectors under Non-MSME segment excluded from the Scheme,” and clause 4-iii carries the same qualifier. On the plain text, an MSME operating in IT, paper, or education is not excluded by Annexure-A; a non-MSME in the same line of business is. This makes the client's MSME classification the determinative fact in those eight sectors — and therefore makes a current, correct Udyam Registration worth verifying before the branch forms its own view. Where the classification is borderline, confirm the reading with the MLI against the NCGTC FAQs (clause 21) before committing an opinion.
Two different dates test two different things — and clients conflate them. The 31.03.2026 test looks at asset classification on a frozen historical date: standard, excluding SMA-2. The clause 15 test looks at the position on the date of sanction and disbursement: not an NPA with any lender. A borrower who was standard on 31.03.2026 but has since slipped into NPA at another bank fails the second test even though it passes the first. Conversely, an account that was SMA-0 or SMA-1 on 31.03.2026 is not disqualified — only SMA-2 is carved out of ‘standard’. That distinction is worth checking against the branch's own records rather than assuming, because a stressed-but-not-SMA-2 borrower is exactly the profile this scheme was designed to reach.
Quantum & Pricing

20% of a Peak That Is Already Fixed — and a Rate Ceiling by Lender Type

ParameterMSMEs / Non-MSMEs (except airline)Airline sector
Quantum (6a)Up to 20% of the peak fund-based working capital outstanding during Q4 FY 2025-26 — 01.01.2026 to 31.03.2026, both days inclusive.Up to 100% of total peak credit outstanding (fund-based and non-fund based) over the same Q4 FY 2025-26 window.
Maximum loan (6b)₹100 crore per borrower.₹1,500 crore per borrower. Anything beyond ₹1,000 crore and up to ₹1,500 crore is permitted only with proportionate equity contribution from the promoters / owners.
Guarantee cover (6c)100% of amount in default for MSMEs; 90% for non-MSMEs.90% of amount in default.
Interest rate (6d)Banks / FIs: MSMEs — EBLR + 0.75%; Non-MSMEs — MCLR + 0.75% with a cap of 9% p.a. NBFCs: rate shall not exceed 13% p.a.To be decided as per the board-approved policy of the lending institution.
Facility type (4-ii)Additional working capital term loan, operated as a separate loan account.Additional working capital term loan and / or non-fund based facility, operated as a separate account.

For MSMEs, clause 6d permits a bank that uses a different nomenclature instead of EBLR for MSME lending — or any other standard or uniform internal benchmark for pricing MSME exposures consistent with RBI guidelines — to use that benchmark for determining the applicable rate.

The entitlement is arithmetic on a closed period — get the number from the bank, not from the books. The base is the peak fund-based working capital outstanding between 01.01.2026 and 31.03.2026 — a single highest-utilisation day inside a quarter that has already ended. It is neither the sanctioned limit nor the average utilisation nor the year-end balance, and it cannot be improved by any action taken now. The figure the branch pulls from its system is the operative one, so ask for it in writing early: a client running a ₹10 crore limit but peaking at ₹6 crore in that quarter is entitled to ₹1.2 crore, not ₹2 crore. Where a borrower holds limits with more than one MLI, establish at the outset which lender is computing the peak and on what data, before an expectation is set with the promoter.
One drafting ambiguity worth resolving with the branch. Clause 6d reads “MSMEs – EBLR+0.75%; Non-MSMEs – MCLR+0.75% with a cap of 9% p.a.” On a strict reading the 9% ceiling attaches to the non-MSME limb it follows; a broader reading treats it as an overall cap on bank / FI pricing under the scheme. The distinction matters in a rising-rate environment for an MSME priced off a high EBLR. This is precisely the kind of point clause 21 anticipates — confirm the applicable ceiling against the NCGTC FAQs and the MLI's own circular before it is stated in a sanction-comparison note to a client. Note also that NBFC pricing carries a hard, unambiguous 13% p.a. ceiling, so the lender-type decision has a real pricing consequence.
Tenor, Fees & Security

Five Years, a One-Year Moratorium — But Interest Is Never Deferred

ItemRule
Tenor (6g)5 years from the date of first disbursement, including a moratorium of 1 year (non-airline). Airline: 7 years including a 2-year moratorium.
Interest servicing (6e)To be serviced as and when due, including during the moratorium period.
Guarantee fee (6f)Nil.
Processing fee (7)No processing fee shall be charged for sanction of the facility.
Pre-payment (8)No pre-payment penalty shall be charged by the MLI for early repayment.
Tenure of guarantee (4-ix)Guarantee cover is co-terminus with the tenor of the loan.
Security (10)MLIs must create charge on existing securities (primary and collateral) and on assets created out of the ECLGS 5.0 loan, within 90 days of first disbursement. Additional security applies to the airline sector per Annexure-I.
Facilities not covered (9)No guarantee where the risk is additionally covered under any RBI, Central Government, insurer or other guarantee / indemnity scheme, to the extent so covered; or where the facility is inconsistent with these guidelines or any law, directive or RBI instruction in force.
“Moratorium” here means principal only — model it that way. Clause 6e requires interest to be serviced as and when due including during the moratorium. So the year-one relief is a deferral of principal repayment, not a payment holiday: the borrower still carries monthly interest servicing from the first month on the full drawn amount. In a cash flow projection, year one should show interest outgo with zero principal amortisation, and years two to five should absorb the entire principal over four years — a materially heavier amortisation than a flat five-year schedule would suggest. Clients reading “5 years with 1 year moratorium” as breathing room often miss that the repayment is compressed, not lengthened. The nil pre-payment penalty is the useful counterweight: a borrower whose liquidity recovers can retire the facility early at no cost.
Clause 9(a) is a stacking rule, and it bites on other guarantee schemes. The cover is unavailable where the same risk is additionally covered under another scheme operated by RBI, the Central Government, an insurer or any guarantee or indemnity provider — to the extent so covered. Read together with the CGSE carve-out in clause 4-iii, the practical discipline before filing is to map every existing guarantee or credit-insurance cover attaching to the borrower's facilities — CGTMSE, CGSE, MCGS, ECGC and the like — and identify the extent of any overlap. This is a scheme-stacking analysis, and it belongs at the appraisal stage rather than at the claim stage, where the overlap will be discovered by NCGTC instead.
The Airline Track

Bigger Cap, Tighter Leash: End-use Control and an EBITDA Test

For scheduled passenger airlines, almost every parameter differs: 100% of peak credit outstanding rather than 20%, fund-based and non-fund based both counted, a ₹1,500 crore cap, a 7-year tenor with a 2-year moratorium, and pricing left to the lender's board-approved policy. Guarantee cover is 90%. Up to 50% of the estimated moratorium-period interest may be earmarked from the ECLGS facility itself towards a Funded Interest Term Loan (clause 6e).

End-use restrictions (Annexure-I, part i)

  • •Up to ₹100 crore: usable for all working capital expenses, except payment to the promoter or promoter-related entities, group entities or associates. A self-declaration from the borrower is required.
  • •Beyond ₹100 crore: usable only for salary expenses (excluding executive directors and CEO, but including contract employees), ATF / fuel purchases from Oil Marketing Companies, airport charges, aircraft lease charges and statutory expenses — again excluding related parties — and each of these must be evidenced by an auditor's certificate.

Additional security where the facility exceeds ₹500 crore (Annexure-I, part ii)

The trigger is an EBITDA test for 9M FY2026 — 01.04.2025 to 31.12.2025. If EBITDA over that period is positive: no additional security. If negative, the borrower must provide one of the following for the portion of assistance exceeding ₹500 crore:

  • •Pledge of shares equal to at least 50% of the incremental funding beyond ₹500 crore; or
  • •Personal guarantee of promoters, supported by an asset statement and an undertaking not to dispose of assets during the tenure — with the guarantor's net worth at least 50% of the amount in excess of ₹500 crore; or
  • •Corporate guarantee from a group or holding entity carrying an investment-grade rating (as defined by the scheme's Management Committee), with minimum net worth equal to 50% of the funding in excess of ₹500 crore.

In all airline cases, a second charge on existing primary and collateral securities extends to cover the additional loan.

The auditor's certificate is a recurring professional engagement, not a one-time formality. For any airline drawdown above ₹100 crore, end-use is restricted to five named heads and evidenced by auditor certification — which means a continuing assurance mandate running alongside the facility, with related-party payments as the specific exclusion to be tested. The EBITDA test adds a second workstream: a defensible 9M FY2026 EBITDA computation determines whether security worth 50% of the excess over ₹500 crore is triggered at all, so the basis of that computation is worth agreeing with the lender in advance rather than defending afterwards.
Invoking the Guarantee

From NPA to Claim Payment, and What “Legal Action Initiated” Actually Means

  1. 1The ECLGS 5.0 account turns NPA: The guarantee may be invoked on the ECLGS 5.0 loan account turning NPA — provided that account was covered under ECLGS 5.0 at the time it turned NPA (11a). NPA classification follows RBI instructions in force (4-v).
  2. 290 days to record the NPA date on the portal: The MLI shall enter the date of NPA on the NCGTC portal within 90 days of the account turning NPA (11b).
  3. 3Claim lodged — and the amount is capped: The amount in default is the outstanding principal and interest as on the NPA date or the date of lodgment, whichever is lower (4-i). Guarantee cover applies at 100% (MSME) or 90% (non-MSME / airline) of that figure.
  4. 475% paid within 30 days: NCGTC pays 75% of the guaranteed amount within 30 days of an eligible claim being preferred — subject to the claim being otherwise in order and complete in all respects (11c).
  5. 5The balance 25% waits: The remaining 25% is paid on conclusion of recovery proceedings, or three years from the date of settlement of the first claim, whichever is earlier (11c).
  6. 6Legal action — the definition that governs: A recall notice alone is not initiation of legal action (11d). Legal action is treated as initiated on filing in Lok Adalat, Civil Court or DRT; on action pursuant to a notice under Section 13(4) of the SARFAESI Act, 2002; on admission of an application under NCLT; or on such other action as NCGTC may decide from time to time.
What this timeline means for a borrower on the other side of a default. Guarantee invocation is not a settlement of the borrower's debt — it is the bank recovering from the Trust while continuing to pursue the borrower. Clause 11d's definition tells a defaulting borrower exactly what is coming: the lender has a strong institutional incentive to move past a recall notice into SARFAESI 13(4) action, DRT or NCLT, because the residual 25% of its claim is tied to the conclusion of recovery proceedings. A client who assumes the bank will go quiet once it has been paid 75% has read the incentive backwards. If a business is heading towards default on an ECLGS facility, restructuring conversations should start well before the NPA date, not after invocation.
Recoveries & Subrogation

Every Rupee Recovered Is Deemed to Be the Guaranteed Debt First

Order of Appropriation After Invocation (clause 12)

Where recoveries are made after the guarantee has been invoked, the MLI first adjusts them towards the default amount relating to first charge and the legal costs it incurred for recovery, and thereafter remits the balance to NCGTC.

Subrogation and Lien (clause 16a)

The MLI holds lien on assets created out of the credit facility, on its own behalf and on behalf of the Trust. The Trust does not exercise subrogation rights: recovery of dues, takeover of assets and sale of assets rest entirely with the lending institution. The MLI must furnish details of its recovery efforts and realisations to NCGTC as required.

Deemed Appropriation Across Multiple Debts (clause 16b)

Where a borrower owes several distinct and separate debts to the same MLI and makes payment towards any one or more of them, that payment is deemed to have been appropriated to the guaranteed debt in respect of which a claim has been preferred and paid — irrespective of the manner of appropriation indicated by the borrower, and irrespective of how the MLI actually applied it.

Delay in Remitting Recoveries (clause 16c)

Amounts recovered and due to the Trust must be paid without delay. Anything outstanding beyond 30 days from the date of first recovery carries interest payable by the MLI to the Trust at 4% above the Repo Rate for the period of delay.

Clause 16(b) overrides the borrower's right of appropriation — and clients should know this before they default. Under general law a debtor may direct which debt a payment discharges. Under this scheme, once a claim has been preferred and paid on the guaranteed account, payments the borrower makes towards any of its debts with that MLI are deemed to have been appropriated to the guaranteed debt, whatever instruction accompanied the cheque. For a borrower servicing several facilities with the same bank — a term loan, a cash credit and the ECLGS account — this quietly re-directs money away from the facility the promoter intended to protect. It is a strong argument for keeping the ECLGS account current, since selective servicing of other lines will not have the effect the client expects.
MLI Obligations

Certification at Entry, Diligence Throughout, Verification at Claim

Before the Guarantee Attaches

An MLI is not entitled to a guarantee on any eligible facility unless it has submitted an Undertaking with the Trustee Company, in the required form, covering all eligible credit facilities it grants under the scheme (clause 13).

The Certification Bargain — clause 14(c)

The MLI checks and satisfies itself as to borrower eligibility. The guarantee is extended at the time of application on the basis of the MLI's certification — and the MLI must retain the eligibility details, which will be checked at the time of claim settlement. Eligibility is therefore verified twice: cursorily at entry, and properly when money is being claimed.

Continuing Obligations of the Lender (clause 14)

  • •Publicise the scheme — highlight it on the website with a link to the scheme webpage, and run SMS and email campaigns to all eligible borrowers (14a, 14b).
  • •Monitor the account closely and put in all required effort to keep it regularly serviced (14d).
  • •Safeguard the primary securities in good and enforceable condition (14e).
  • •Lodge claims in the prescribed form, manner and time, with no delay in notifying default (14f).
  • •Exercise the same diligence in recovery as if no guarantee existed, and refrain from any act or omission — before or after invocation — that adversely affects the Trust's interest as guarantor. Intimate NCGTC before entering any compromise or arrangement that would discharge or waive a personal guarantee or security (14i).
  • •Create no charge on security held in a guaranteed account for the benefit of any uncovered account, with itself or any other creditor, without intimating NCGTC — and secure NCGTC the right to list defaulting borrowers' names and particulars on its website (14j).

Returns, Inspection and the Final Word

The MLI must furnish statements, information, documents, receipts and certificates as NCGTC requires, and is deemed to have affirmed their contents as true — though no claim shall be rejected and no liability attaches for anything done in good faith (17a, 17b). NCGTC may inspect or call for copies of the books of account and records of the lending institution and of any borrower, through its own officers or an appointed person; every officer or employee of the lender or the borrower in a position to do so must make those records available (17c). On any question of interpretation of the scheme or of directions or clarifications issued under it, the decision of NCGTC is final (18), and NCGTC may issue further operating instructions on matters not specifically provided for (19). Changes to eligibility, guarantee fee, rate of interest or tenor rest with the Management Committee for the ECLGS Fund (20).

Where the professional work concentrates on an ECLGS 5.0 file. Before sanction: establishing the Q4 FY 2025-26 peak from the bank's records, confirming standard-excluding-SMA-2 status as on 31.03.2026, testing the CGSE overlap and the clause 9(a) stacking position, and — in the eight Annexure-A sectors — pinning the MSME classification. At sanction: checking that pricing sits within the applicable ceiling and that no processing fee has been levied. After disbursement: watching the 90-day charge creation window, and building the facility into projections as interest-servicing-through-moratorium with principal compressed into years two to five. Throughout: clause 17(c) gives NCGTC an inspection right that reaches the borrower's own books, so the file the client keeps on end-use and eligibility should be built to survive inspection, not merely to obtain sanction.