ECLGS 5.0: Top 3 airlines may get up to ₹1.5K cr each, says DFS secy

Credit facilities worth Rs 70,000-80,000 crore available with SBI for MSMEs under ECLGS scheme: SBI chairman

India’s three major airlines could each avail of up to ₹1,500 crore under the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 announced recently to help businesses hit by the West Asia conflict, Department of Financial Services (DFS) Secretary M Nagaraju said on Thursday. 

The Cabinet on Tuesday approved ₹2.55 trillion of additional working capital support for the affected businesses. 

For aviation, the scheme aims to shield airlines from financial stress caused by rising aviation turbine fuel (ATF) prices, airspace closures, and reduced international operations. Air India, IndiGo, and SpiceJet are the country’s top three airlines. 

“We have three major airlines. We have proposed a maximum of ₹1,500 crore for one company, so that goes up to ₹4,500 crore. Even if the smaller ones take ₹50 crore or ₹100 crore, it won’t exceed ₹5,000 crore,” Nagaraju said on the sidelines of an Indian Banks’ Association event in Mumbai. 

“The overall quantum is based on the banks’ credit exposure, the outstanding amount, and the likely non-performing assets (NPAs) based on past experience. Based on that, we provide the guarantee amount. That’s how the scheme works,” he said, adding that interest rates for the airline sector would be marginally lower, with bank boards deciding the specifics. 

Under ECLGS 5.0, airlines can avail loans of up to ₹1,000 crore per borrower, along with an additional ₹500 crore linked to equivalent equity infusion. The loans carry a tenure of up to seven years, including a two-year repayment moratorium. Up to 50 per cent of the interest can also be converted into a Funded Interest Term Loan. 

“While assessing airlines, there could be some carriers that may have had problems earlier. But that is not a reason to deny credit under the scheme. We have put in additional guardrails for airlines so that the money is properly utilised for the purpose for which it is being given — enhanced working capital challenges arising from the West Asia crisis,” said Manoj Muttathil Ayyappan, joint secretary, DFS. 

IndiGo’s consolidated net profit fell 77.6 per cent year-on-year (Y-o-Y) to ₹549 crore in the third quarter of FY26. Air India, which is not listed, is projected to report losses exceeding ₹22,000 crore in FY26, sharply higher than the consolidated loss of about ₹10,859 crore in FY25. SpiceJet posted a ₹262 crore loss in the December quarter of FY26, compared with a ₹20 crore profit a year earlier. 

State Bank of India Chairman C S Setty clarified that the facility is only available to airlines that already have banking relationships. “This is not a new credit facility. Banks are aware of the challenges airlines are going through. It is only the additional exposure that will be guaranteed by the government,” Setty said. 

Indian airlines reduced nearly 25 per cent of their weekly international flights in May as airspace restrictions linked to the West Asia conflict and curbs imposed by Pakistan increase costs and force longer flying routes. However, foreign carriers operating in India continue to hold steady and expand. 

Ratings agency Icra has revised its outlook for the Indian aviation sector to “negative” from “stable”, warning that geopolitical tensions, higher fuel prices, and rupee depreciation could sharply worsen airline finances in FY26. The agency estimates industry net losses could widen to ₹17,000 crore-18,000 crore in FY26 from around ₹5,500 crore in FY25. 

Additionally, Setty estimated that ₹70,000 crore-80,000 crore credit will be available for MSMEs under the scheme from SBI. However, he said it is unlikely that everybody who is eligible under the scheme will opt for it, but nonetheless it is available for everyone in the MSME segment, and in the next 8-10 days banks will address implementation of this scheme. 

ECLGS 5.0 provides a 100 per cent government guarantee for existing standard MSME borrowers and a 90 per cent guarantee for non-MSME borrowers, including airlines. SBI’s MSME loan book stood at ₹6 trillion as of December 2025. 

Nagaraju said most sectors have been affected by the ongoing disruptions, except areas such as educational institutions, defence, tea, and horticulture. “Therefore, they have been excluded from the scheme's eligibility criteria,” said Nagaraju, adding that private lenders, including HDFC Bank and ICICI Bank, are also expected to participate given their MSME exposure. 

ECLGS was originally launched to cushion the Covid-19 shock. “…interestingly, the ECLGS default rate was lower than the average MSME default rate,” Setty noted. Unlike the pandemic-era response, no restructuring arrangement has been announced this time, though Nagaraju said the government may approach the RBI on the matter if stress in the sector deepens. 

Turbulence in the sector

• Airlines cut 25% of weekly international flights in May amid West Asia disruptions
• Air India may post losses over ₹22,000 crore in FY26 against ₹10,859 crore in FY25
• IndiGo net profit fell 77.6% to ₹549 crore in Q3FY26
• SpiceJet slipped to ₹262 crore loss in Q3FY26 from ₹20 crore profit in the year-ago period
• Icra has revised aviation outlook to “negative” from “stable”, says industry losses may widen to ₹17,000-18,000 crore in FY26