New Delhi: The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved an equity support of ₹5,000 crore for the Small Industries Development Bank of India (SIDBI). The move aims to significantly enhance the flow of institutional credit to Micro, Small and Medium Enterprises (MSMEs) across India, supporting entrepreneurship, job creation, and inclusive economic growth.
Phased Capital Infusion
The equity infusion will be made by the Department of Financial Services (DFS) in a phased manner:
₹3,000 crore to be infused in FY 2025–26 at a book value of ₹568.65 per share (as on March 31, 2025)
Remaining ₹2,000 crore to be infused in two equal tranches of ₹1,000 crore each in FY 2026–27 and FY 2027–28, at book value as on March 31 of the respective preceding financial years
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Major Boost for MSMEs
The capital support is expected to substantially enhance MSME financing. SIDBI’s financial assistance to MSMEs is projected to rise from 76.26 lakh at the end of FY 2024–25 to 102 lakh by FY 2027–28, adding around 25.74 lakh new MSME beneficiaries.
Based on Ministry of MSME data (as of September 30, 2025), 6.90 crore MSMEs generate employment for approximately 30.16 crore people, averaging 4.37 jobs per enterprise. Using this benchmark, the equity infusion could lead to the creation of nearly 1.12 crore new jobs by FY 2027–28, providing a substantial boost to employment generation.
Strengthening SIDBI’s Balance Sheet
The move comes amid rising risk-weighted assets on SIDBI’s balance sheet, driven by:
- Increased directed lending to MSMEs
- Expansion of its credit portfolio over the next five years
- Focus on digital and collateral-free credit products
- Venture debt financing for start-ups
The infusion is expected to strengthen SIDBI’s Capital to Risk-weighted Assets Ratio (CRAR), enabling the institution to raise funds at competitive market rates while maintaining a robust credit rating.
Enabling Affordable Credit
With the enhanced CRAR, SIDBI can:
- Maintain regulatory capital above 10.50% under stress scenarios
- Maintain above 14.50% under Pillar 1 and Pillar 2 norms
- Mobilise resources at fair and competitive rates
This will expand the availability of affordable credit to MSMEs, reinforcing SIDBI’s role as the principal financial institution supporting MSMEs and contributing to the country’s inclusive economic growth.
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