Cabinet Approves ₹5,000 Crore Equity Support for SIDBI to Boost MSME Financing

The Union Cabinet, led by Prime Minister Narendra Modi, has sanctioned an equity support of ₹5,000 crore to the Small Industries Development Bank of India (SIDBI).  

This initiative aims to bolster the flow of credit to Micro, Small, and Medium Enterprises (MSMEs), facilitating the addition of 25.74 lakh new MSME beneficiaries. 

Significant Impact on MSME Credit Flow 

The infusion of ₹5,000 crore into SIDBI is structured in 3 tranches: ₹3,000 crore in the financial year 2025-26, followed by ₹1,000 crore each in 2026-27 and 2027-28. This strategic capital injection is expected to significantly enhance SIDBI's capacity to extend financial assistance to MSMEs.  

The number of MSMEs receiving financial aid is projected to rise from 76.26 lakh at the end of the financial year 2025 to 102 lakh by the end of 2028, marking an increase of 25.74 lakh new beneficiaries. 

Employment Generation and Economic Growth 

According to the latest data from the Ministry of MSME, as of September 30, 2025, 6.90 crore MSMEs have generated employment for 3,016 crore individuals, averaging 4.37 persons per MSME.  

With the anticipated addition of 25.74 lakh new MSMEs, employment generation is estimated to reach 1.12 crore by the end of the financial year 2027-28. 

SIDBI's enhanced capital base will enable the development of digital and digitally-enabled collateral-free credit products.  

These products, alongside venture debt offerings to start-ups, are designed to boost credit flow while maintaining a healthy Capital to Risk-weighted Assets Ratio (CRAR). A robust CRAR is crucial for protecting credit ratings and ensuring SIDBI can generate resources at competitive interest rates. 

Maintaining a Healthy CRAR 

The proposed equity infusion will help SIDBI maintain a CRAR above 10.50% under high-stress scenarios and above 14.50% under Pillar 1 and Pillar 2 over the next 3 years. This financial stability is essential for sustaining SIDBI's operations and supporting MSME growth. 

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Conclusion 

The Cabinet's approval of ₹5,000 crore equity support to SIDBI is a significant step towards enhancing credit availability for MSMEs. This move is expected to increase the number of MSME beneficiaries and contribute to substantial employment generation, thereby supporting economic growth. 

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