ECLGS 5.0 Rule: Does Your SME Loan Get Cheaper?

RBI has eased how much capital banks must set aside for ECLGS 5.0 loans. This means banks can lend more freely to small businesses under the scheme, potentially making credit easier and cheaper to access.

Here's what happened: RBI revised risk weights for ECLGS 5.0 loans: 75% of the government-guaranteed portion now attracts zero risk weight instead of the standard rate.. The remaining 25% of the loan exposure carries a 20% risk weight, significantly lower than the 100% weight typically applied to business loans.. Lower risk weights free up bank capital, meaning lenders have more room to approve ECLGS loans without breaching regulatory capital requirements..

What you should do: Check if your existing business loan qualifies under ECLGS 5.0 — ask your bank branch or SIDBI-linked lender directly this week.. If you were earlier rejected for an ECLGS loan due to bank capacity constraints, reapply now as lenders have more lending headroom.. Compare interest rates across PSU banks and private lenders offering ECLGS 5.0 — rate differences of 1-2% on a ₹25L loan save ₹25,000+ annually..

Pro tip: ECLGS loans are 100% government-guaranteed up to the covered portion — this means your lender cannot demand additional collateral for the guaranteed part. Always insist on this in writing before signing.