Cabinet clears ₹5,000 crore equity infusion into SIDBI to boost MSME credit

The government's phased equity support aims to strengthen SIDBI's capital base, expand MSME lending, improve credit access and support employment growth while keeping capital adequacy well above regul

The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday approved an equity support of ₹5,000 crore to the Small Industries Development Bank of India (SIDBI) to strengthen its capital base and enhance credit flow to micro, small and medium enterprises (MSMEs).

 

How will the ₹5,000 crore equity infusion into SIDBI be structured? 

The equity capital will be infused by the Department of Financial Services (DFS) in a phased manner over three years. Of the total amount, ₹3,000 crore will be infused in FY26 at a book value of ₹568.65 per share as on March 31, 2025, while the remaining ₹2,000 crore will be infused in two equal tranches of ₹1,000 crore each in FY27 and FY28 at the book value as on March 31 of the respective preceding financial years.

 

How many MSMEs are expected to benefit from the capital support? 

According to the official press statement, the capital infusion is expected to significantly expand SIDBI’s outreach. The number of MSMEs receiving financial assistance is projected to rise from 76.26 lakh at the end of FY25 to about 1.02 crore by the end of FY28, adding nearly 25.74 lakh new beneficiaries.

 

What does the government estimate on jobs linked to MSME expansion? 

Based on the latest data from the Ministry of MSME, as on September 30, 2025, around 6.90 crore MSMEs generate employment for 30.16 crore people, translating into an average of 4.37 persons per MSME. “Applying this average, the additional MSMEs supported by SIDBI are estimated to generate employment for about 1.12 crore people by the end of FY28,” the press statement said.

 

Why does SIDBI need higher capital over the next few years? 

The government noted that SIDBI’s risk-weighted assets are expected to increase substantially over the next five years due to a focus on directed credit, expansion of digital and digitally enabled collateral-free loan products, and growing venture debt exposure to start-ups. This, in turn, will require higher capital to maintain a healthy Capital to Risk-weighted Assets Ratio (CRAR).

 

How will the infusion help SIDBI maintain capital adequacy and lending capacity? 

“A strong CRAR, well above the regulatory minimum, is critical for protecting SIDBI’s credit rating and enabling it to raise resources at competitive rates,” the statement said. The equity infusion will help SIDBI maintain a CRAR above 10.5 per cent even under high-stress scenarios and above 14.5 per cent under Pillar 1 and Pillar 2 norms over the next three years.

 

The government statement further noted that the additional capital would enable SIDBI to mobilise funds at fair interest rates and pass on the benefit to MSMEs through increased availability of credit at competitive costs, supporting growth, innovation and employment generation in the sector.