Cabinet clears Rs 5,000 cr equity infusion for SIDBI to boost MSME credit

The Cabinet decision extends government funding and gap support for Atal Pension Yojana till FY31, aiming to deepen financial inclusion and ensure old-age income security for unorganised sector worker

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

 

The Department of Financial Services will infuse the capital over three years. Of the total amount, Rs 3,000 crore will be infused in FY26 at a book value of Rs 568.65 per share as on March 31, 2025. The remaining Rs 2,000 crore will be infused in two tranches of Rs 1,000 crore each in FY27 and FY28 at book values as on March 31 of the respective preceding financial year.

 

According to a 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 7.626 million at the end of FY25 to about 10.2 million by the end of FY28, adding nearly 2.574 million new beneficiaries.

 

Based on the latest data from the Ministry of MSME, as on September 30, 2025, around 69 million MSMEs generate employment for 301.6 million people, translating into an average of 4.37 persons per enterprise. “Applying this average, the additional MSMEs supported by SIDBI are estimated to generate employment for about 1.12 crore [11.2 million] people by the end of FY28,” the statement said.

 

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 startups. This will require higher capital to maintain a healthy Capital to Risk-weighted Assets Ratio (CRAR).

 

“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.