ECLGS 5.0 exceeds one million guarantees; The center is expanding the system of guarantees for microfinance loans | Today’s news

New Delhi: The government-backed Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 has crossed a major milestone within weeks of its launch, with more than one million guarantees issued. ₹According to the Ministry of Finance, loan guarantees worth 48,000 million crowns were sanctioned.

Approved by the government on 5 May 2026, the scheme issued 1,06,549 warrants amounting to ₹48,484.26 crore as on June 9. Of the total guarantees issued, 96% by number and 86% by value belong to the micro, small and medium enterprises (MSME) sector, which underlines the program’s focus on supporting smaller enterprises.

Public sector banks played a dominant role in the rollout, accounting for 96% of the guarantees issued, which helped speed up credit delivery to eligible borrowers.

ECLGS 5.0 provides 100% coverage for MSME loans and 90% coverage for non-MSME borrowers, encouraging lenders to extend credit amid liquidity pressures stemming from the war in West Asia. The objective of this scheme is to facilitate additional credit flow ₹2.55 trillion to existing borrowers.

The finance ministry said the widespread participation of public and private sector banks, regional rural banks, small finance banks and non-banking finance companies has helped the scheme’s widespread adoption. Member lending institutions also reached out to customers through websites, emails and SMS campaigns.

In addition, the Department of Financial Services (DFS) organized awareness programs at nine locations through State Level Bankers’ Committees (SLBCs), with the participation of National Credit Guarantee Trustee Company Ltd (NCGTC), PSB Alliance and industry stakeholders. A second phase of the outreach program is being considered.

The government has separately extended the Credit Guarantee Program for Microfinance Institutions-2.0 (CGSMFI-2.0) till August 31, 2026 or until the guarantees covering ₹20,000 million crowns are issued, whichever comes first.

The government has also increased the maximum loan amount available to large NBFCs-MFIs and MFIs under the scheme from ₹300 million crowns ₹1,000 crore, subject to an overall cap of 20% of assets under management (AUM).

The extension and higher credit ceiling are expected to improve utilization of the system and boost credit flow to the microfinance sector.

Launched on March 20, 2026, CGSMFI-2.0 provides, through the NCGTC, collateral cover to banks and financial institutions against expected losses on loans extended to NBFCs-MFIs and MFIs for on-lending to small borrowers. Loans to value ₹As part of this regime, 770 million crowns have been sanctioned so far.

Under this scheme, the guarantee cover is fixed at 80% of outstanding amounts for small NBFC-MFIs/MFIs, 75% for medium-sized entities and 70% for large institutions. The guarantee fee is fixed at 0.50% per annum.

Interest rates on loans extended by NBFCs-MFIs and MFIs are capped at External Reference Lending Rate (EBLR) or Marginal Cost of Funds Based Lending Rate (MCLR) plus 2 percentage points. For loans provided by monetary financial institutions to end borrowers, interest rates must remain at least 1 percentage point below the institution’s average interest rate over the past 6 months.

The two announcements highlight the government’s continued focus on using sovereign credit guarantee mechanisms to maintain credit flows to businesses and vulnerable borrowers amid ongoing economic and geopolitical uncertainties.