India’s 3 major airlines likely to get ₹1.5k cr support under ECLGS 5.0

The allocation is part of the government’s broader plan to facilitate Rs 2.55 trillion in additional credit to address challenges arising from the West Asia conflict. The aviation component aims to shield airlines from financial stress caused by rising aviation turbine fuel (ATF) prices, airspace closures, and reduced international operations, which have hit aircraft utilisation and liquidity.

“We have three major airlines. We have proposed a maximum of Rs 1,500 crore for one company, so that goes up to Rs 4,500 crore. Even if the smaller ones take Rs 50 crore or Rs 100 crore, it won’t exceed Rs 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.

For the airline sector, under ECLGS 5.0, the maximum loan limit is Rs 1,000 crore per borrower, with an additional Rs 500 crore available against equivalent equity infusion. Loans carry a tenure of up to seven years, including a two-year repayment moratorium, with an option to convert up to 50 per cent of interest into a Funded Interest Term Loan (FITL).

“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.

The consolidated net profit of IndiGo fell 77.6 per cent year-on-year (YoY) to Rs 549 crore in the third quarter of 2025-26, while Air India, which is not a listed company, is projected to report losses exceeding Rs 22,000 crore in FY26, sharply higher than the consolidated loss of around Rs 10,859 crore reported in FY25. Budget carrier SpiceJet swung to a Rs 262 crore loss in the December quarter of FY26 from a Rs 20 crore profit in the corresponding period last year.

C S Setty, chairman, State Bank of India (SBI), clarified that the facility is available to airlines that already have credit facilities with banks. “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.

The financial stress comes at a time when Indian airlines have slashed nearly 25 per cent of their weekly international flights in May as airspace curbs linked to the West Asia conflict and restrictions imposed by Pakistan push up costs and force longer flying routes, even as foreign carriers operating in India continue to hold steady and expand.

Ratings agency ICRA revised the outlook for the Indian aviation sector to “negative” from “stable”, warning that a combination of geopolitical tensions, rising fuel prices, and currency depreciation could sharply worsen airline finances in FY26. ICRA stated that the Indian aviation industry’s net losses could widen significantly to Rs 17,000-18,000 crore in FY26, compared with around Rs 5,500 crore in FY25.

Additionally, Setty estimated that Rs 70,000-80,000 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 offers a 100 per cent government guarantee for existing standard MSME borrowers and 90 per cent for non-MSME borrowers, including airlines. SBI’s MSME loan book stood at Rs 6 trillion as of December 2025.

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.