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

The Union Cabinet on Wednesday approved an equity infusion of ₹5,000 crore into the Small Industries Development Bank of India (SIDBI) to boost the flow of credit to micro, small and medium enterprises (MSMEs), an official statement said.

The decision was taken at a Cabinet meeting chaired by Prime Minister Narendra Modi.

The capital support will be provided by the Department of Financial Services in three tranches of ₹3,000 crore in 2025-26 and ₹1,000 crore each in 2026-27 and 2027-28.

The first tranche will be infused at the book value of ₹568.65 per share as on March 31, 2025, while the subsequent tranches will be at the book value as on March 31 of the respective preceding financial years.

“This infusion of additional capital would enable SIDBI to generate resources at fair interest rates, thereby increasing the flow of credit to Micro, Small & Medium Enterprises (MSMEs) at competitive cost,” the statement read.

Following the infusion, the number of MSMEs receiving financial assistance from SIDBI is expected to rise from 76.26 lakh at the end of 2025 to about 1.02 crore by the end of 2028.

Based on official MSME ministry data, which shows average employment generation of about 4.37 persons per enterprise, the additional beneficiaries are estimated to generate employment for around 1.12 crore people by 2027-28, the statement added.

The government noted that SIDBI’s risk-weighted assets are projected to increase significantly due to a growing focus on directed credit and anticipated growth in that portfolio over the next five years.

“The digital and digitally-enabled collateral-free credit products...along with the venture debt being offered to start-ups, will further escalate the risk-weighted assets, requiring even more capital to meet healthy CRAR,” the government said.

A strong CRAR, well above the regulatory minimum, is crucial to protect SIDBI’s credit rating and ensure access to funds at reasonable costs, it added.

The phased equity infusion is expected to help SIDBI maintain CRAR above 10.5% under high-stress scenarios and above 14.5% under Pillar 1 and Pillar 2 norms over the next three years.