How aviation sector could gain most from govt's new emergency credit scheme

The newly approved emergency credit guarantee scheme could benefit around 1.1 crore micro, small and medium enterprises (MSMEs) with additional credit flow of about ₹2-2.3 lakh per account, a report by State Bank of India Research said on Wednesday.

The report suggested that the airlines stand to gain the most from the new package announced amid the West Asia conflict.

The Union cabinet this week approved the fifth version of the Emergency Credit Line Guarantee Scheme (ECLGS 5.0) to facilitate additional credit flow of about ₹2.55 lakh crore, including ₹5,000 crore earmarked for the aviation sector.

Under the scheme, standard MSMEs will receive 100% government guarantee coverage on additional loans, while non-MSMEs and airlines will receive 90% guarantee cover through the National Credit Guarantee Trustee Company Ltd.

According to SBI Research, about 45% of India’s MSME loan portfolio could qualify under the programme.

“Our preliminary estimates indicate that around 1.1 crore MSME accounts will be eligible to get benefit from the scheme with per account an average additional credit flow of ₹2 to ₹2.3 lakh,” the report said.

“This timely intervention will ensure liquidity support, protect jobs, sustain supply chains, and strengthen the resilience of Indian economy,” it added.

The scheme allows eligible borrowers to avail additional credit of up to 20% of the peak working capital utilised during the fourth quarter of FY26, capped at ₹100 crore.

For airlines, support can go up to 100% of peak working capital utilisation, subject to a ceiling of ₹1,500 crore per borrower.

Aviation sector

SBI Research said the aviation sector was particularly vulnerable to the West Asia conflict because aviation turbine fuel accounts for 30% to 40% of operating costs, while higher fares and uncertainty were weighing on passenger traffic.

“The impact of war in Middle East is twofold on aviation sector. First is the increase in cost of ATF, which on average accounts for 30-40 per cent of the operating costs. Second is the impact on passenger traffic that has reduced due to greater uncertainty and higher prices,” the report noted.

It said ATF prices in Mumbai had risen about 35%, with increases ranging between 35% and 52% across metro cities.

Outstanding bank credit to the aviation sector stood at ₹52,600 crore as of March 2026, up 14% year-on-year, according to the report.

At full disbursement, the proposed ₹5,000 crore support package would amount to about 9.5% of total outstanding aviation credit.

The ECLGS programme was first launched during the COVID-19 pandemic to support small businesses and has since emerged as a key liquidity backstop for MSMEs.

According to SBI Research, earlier versions of the scheme helped prevent nearly ₹1.8 lakh crore worth of MSME loans from turning non-performing and protected an estimated 15 million jobs.