RBI Eases Capital Norms for Banks under ECLGS 5.0

Current Context: On 16 June 2026, the Reserve Bank of India (RBI) eased capital norms for Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 loans.

• Change: A zero risk weight now applies to 75% of the government‑guaranteed portion, if settlement is expected within 30 days of invocation.
• The remaining 25% carries a 20% risk weight, compared to the earlier 100% standard rate for business loans.
• This amendment was made to Paragraph 18(2)(iv) of Capital Adequacy Directions, inserting clause (f) for NBFCs.
• Impact: Lower capital requirements → higher lending capacity → better credit flow to MSMEs → potentially cheaper credit.
• ECLGS 5.0 details: Cabinet approved May 4, 2026, launched by NCGTC (May 8, 2026) to support borrowers hit by the West Asia crisis.
• Credit quantum: Up to 20% of peak fund‑based working capital in Q4 FY26 (capped at ₹100 crore); interest capped at 9% p.a..

Question:

Q.1 Under the revised framework for Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 loans, what risk weight applies to the remaining 25% of the guaranteed portion?
a) 0%
b) 20%
c) 50%
d) 100%

Answer: b) The remaining 25% attracts a 20% risk weight, significantly lower than the earlier standard risk weight.