Cabinet Approves ₹5000-Crore Equity Infusion into SIDBI to Boost MSME Credit
SIDBI plays a central role in India’s MSME financing ecosystem, acting both as a direct lender and as a refinancing institution for banks and non-banking financial companies.
New Delhi: The Union Cabinet on Tuesday approved an equity infusion of ₹5,000 crore into the Small Industries Development Bank of India, a move aimed at expanding the flow of institutional credit to micro, small and medium enterprises (MSMEs).
The capital support will be provided by the Department of Financial Services in three tranches. Of the total amount, ₹3,000 crore will be infused in 2025–26 at a book value of ₹568.65 per share, based on the valuation as of March 31, 2025. The remaining ₹2,000 crore will be infused in equal tranches of ₹1,000 crore each in 2026–27 and 2027–28, at the book value prevailing on March 31 of the respective preceding financial years.
According to the government, the capital infusion is expected to significantly expand SIDBI’s lending capacity. The number of MSMEs receiving financial assistance is projected to increase from 76.26 lakh at the end of 2025 to about 1.02 crore by 2028, adding an estimated 25.74 lakh new beneficiaries.
Based on official MSME ministry data, which indicates that 6.90 crore MSMEs generate employment for 30.16 crore people—an average of 4.37 jobs per enterprise—the additional credit support is expected to create around 1.12 crore jobs by 2027–28.
Strengthening Capital Adequacy
The government said the equity infusion is necessary in view of the anticipated rise in SIDBI’s risk-weighted assets, driven by an expansion in directed credit, digital and collateral-free lending products, and venture debt financing for start-ups.
As SIDBI scales up these portfolios, maintaining a strong capital to risk-weighted assets ratio (CRAR) will be critical to preserving its credit rating and borrowing capacity. The additional capital will help the institution maintain CRAR levels above regulatory requirements under both normal and stress scenarios.
The proposed phased infusion is expected to keep SIDBI’s CRAR above 10.5 percent even under high-stress conditions, and above 14.5 percent under Pillar 1 and Pillar 2 norms over the next three years.
Lower Cost of Funds, Higher Credit Flow
Officials said the strengthened capital base will enable SIDBI to raise funds at competitive interest rates, which in turn is expected to lower the cost of credit for MSMEs. The move aligns with the government’s broader objective of improving access to affordable finance for small businesses, particularly through digital and technology-driven lending platforms.
SIDBI plays a central role in India’s MSME financing ecosystem, acting both as a direct lender and as a refinancing institution for banks and non-banking financial companies. The equity support is intended to reinforce its capacity as MSMEs remain a key driver of employment and economic growth.
