FISME seeks fresh ECLGS 5.0 allocation to clear pending MSME loan requests

Industry body FISME has urged the government to provide additional ECLGS 5.0 guarantee allocation in the Union Budget to clear eligible MSME loan applications left pending.

The Federation of Indian Micro and Small and Medium Enterprises (FISME) has urged the government to provide additional funds for the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 in the upcoming Union Budget, to help clear eligible loan applications that remained pending when the scheme’s guarantee allocation was exhausted.

 

The Union Cabinet had approved ECLGS 5.0 on May 5, 2026, to help businesses deal with cash-flow problems arising due to the West Asia crisis. Under the scheme, banks provide additional loans to eligible businesses, while the government guarantees repayment of the covered amount to lenders in case borrowers default. This reduces the risk for banks and encourages them to extend credit to businesses facing temporary financial difficulties.

 

 In its Budget proposals submitted to the government, FISME said several micro, small and medium enterprises (MSMEs) had applied for loans through the Jan Samarth portal, or directly through banks before the scheme’s closure, but could not receive the benefit because their applications remained unprocessed or the guarantee allocation had been exhausted.

 

Some businesses had even received loan approvals, but were yet to receive the government-backed guarantee or the loan amount, it said.

 

The scheme was originally scheduled to remain operational until March 31, 2027, or until guarantees worth ₹2.55 trillion were issued, whichever was earlier. However, the guarantee allocation was exhausted in August 2026, leading to the discontinuation of fresh coverage under the scheme.

 

FISME said applicants had limited information about how much of the allocation was still available when they submitted their applications. As a result, some businesses risked missing out on the credit support because their lenders could not process their applications in time, despite having applied in good faith.

 

The industry body has sought an additional guarantee allocation, backed by the necessary budgetary provision, to create a one-time window for clearing such pending applications. It has suggested that banks and the Jan Samarth portal identify eligible borrowers through their existing records and complete the processing within a specified timeframe.

 

The proposed window would cover eligible applications submitted before the scheme’s closure, including cases where loans had already been sanctioned, but were awaiting government guarantee coverage or disbursement. All cases would remain subject to the scheme’s existing eligibility conditions.

 

FISME said the measure would help small businesses access the funds they had applied for to meet day-to-day expenses, such as purchasing raw materials, paying workers and maintaining production. It would also ensure that delays in processing applications by lenders do not deprive eligible businesses of the relief intended under the scheme.