Union Cabinet Approves Emergency Credit Line Guarantee Scheme 5.0 on 6 May 2026; Civil Aviation Ministry Says Rs. 5,000 Crore Credit Window Will Support Airlines Facing West Asia-Linked Cost and Liquidity Stress

The Union Cabinet, chaired by Prime Minister Narendra Modi, approved the Emergency Credit Line Guarantee Scheme 5.0 on 6 May 2026 to give targeted credit support to Indian airlines facing short-term liquidity stress. The Civil Aviation Ministry said airlines were affected by a sharp rise in aviation turbine fuel prices, airspace closures, reduced operations on international routes, lower aircraft utilisation and the wider West Asia situation. The scheme sits within an additional credit-flow envelope of Rs. 2,55,000 crore, with Rs. 5,000 crore specifically earmarked for airlines. It will provide guarantee coverage of 100% for MSMEs and 90% for non-MSMEs as well as the airline sector through Member Lending Institutions, with National Credit Guarantee Trustee Company Limited covering the amount in default under eligible additional credit facilities. For airlines, the structure includes a maximum loan limit of Rs. 1,000 crore per borrower and an additional Rs. 500 crore if the borrower brings in equivalent equity. The loan tenure can extend up to seven years, including a two-year repayment moratorium, and up to 50% of interest can be converted into a Funded Interest Term Loan to ease immediate cash-flow pressure. The scheme also permits additional credit up to 20% of peak working capital used during Q4 FY26, capped at Rs. 100 crore, while airlines may receive up to 100% support capped at Rs. 1,500 crore per borrower subject to specified conditions. Loans sanctioned from the date of NCGTC guidelines up to 31 March 2027 will be eligible. The Ministry said the sovereign-backed guarantee is expected to strengthen lender confidence, sustain jobs and connectivity, preserve aviation-sector capacity and reduce the pass-through of higher costs to passengers.