ECLGS 5.0 could raise debt levels of rated corporates by around 10%
Crisil Ratings says ECLGS 5.0 could add around 10% debt to rated companies as firms seek funding support to manage higher working capital needs amid the West Asia conflict
 "ECLGS 5.0 could raise debt levels of rated corporates by around 10%")
The Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 could increase the debt levels of rated corporates by around 10 per cent as companies tap the facility to meet higher working capital requirements arising from the ongoing West Asia conflict, according to Crisil Ratings.
"The incremental support in the form of ECLGS 5.0 could add nearly 10 per cent of existing debt to the balance sheets of companies rated by us. This debt will have repayment obligations beginning in fiscals 2028 and 2029," the rating agency said in a report on Tuesday.
However, Crisil said companies are expected to have adequate capacity to service the additional borrowings.
"We believe companies will have sufficient cash flows to service these obligations, given the current balance sheet strength of most entities," it said.
The ₹2.55 trillion ECLGS 5.0 scheme, which became effective last month, is aimed at providing timely support to eligible companies facing elevated working capital needs due to disruptions in global supply chains and higher crude-linked input costs triggered by the West Asia conflict.
Under the scheme, eligible standard borrowers, excluding SMA-2 accounts, can avail of incremental funding of up to 20 per cent of their peak working capital in the fourth quarter of the previous financial year, subject to a cap of ₹100 crore. The loans carry a five-year tenure with a one-year moratorium. The scheme provides 100 per cent guarantee cover for micro, small and medium enterprises (MSMEs) and 90 per cent for non-MSMEs and airlines.
Crisil expects the strongest demand for the scheme from ceramics, airlines, auto components, diamond polishers and basmati rice exporters, as well as three crude-linked industries that are facing significant cost inflation and supply-chain disruptions.
The rating agency expects working capital requirements of its rated companies to rise by 25-30 per cent this financial year, even as realisations improve by 10-15 per cent and partly offset higher input costs. It also anticipates some moderation in volumes as the impact of the conflict becomes more visible.
"We believe ECLGS 5.0 can fund about a third of the increased working capital requirements of our rated companies immediately, while the rest will be funded by additional enhancements in bank lines by lenders over the remaining part of the fiscal. The scheme thus provides relief by enabling companies to address their temporary working capital needs without disrupting operations," said Manish Gupta, Deputy Chief Ratings Officer, Crisil Ratings.
According to the Ministry of Finance, around 1.06 lakh guarantees amounting to ₹48,484.26 crore had been issued under ECLGS 5.0 as of June 9, 2026, indicating strong initial uptake.
"The extent of ECLGS 5.0 utilisation will be closely linked to the duration and intensity of the West Asia conflict and its impact on commodity prices and supply chains. While reliance on the scheme is likely to be high in the near term, sustained recovery in operating cash flows will be critical to ensure that liquidity remains at comfortable levels," said Himank Sharma, Director, Crisil Ratings.
The rating agency said the trajectory of the conflict and its impact on crude prices, commodities and trade flows will remain a key monitorable going forward.