The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday approved an equity infusion of ₹5,000 crore into the Small Industries Development Bank of India (SIDBI), a move aimed at strengthening credit flow to micro, small and medium enterprises (MSMEs).
According to an official statement, the equity capital will be infused by the Department of Financial Services (DFS) in three tranches. Of the total amount, ₹3,000 crore will be infused in the financial year 2025–26 at a book value of ₹568.65 per share as on March 31, 2025. The remaining ₹2,000 crore will be infused in two equal tranches of ₹1,000 crore each in the financial years 2026–27 and 2027–28, at the book value as on March 31 of the respective preceding financial years.
The government said the capital infusion will enable SIDBI to expand its lending capacity and mobilise additional resources at competitive interest rates, thereby increasing the flow of affordable credit to MSMEs.
Following the equity support, the number of MSMEs receiving financial assistance from SIDBI is expected to rise from 76.26 lakh at the end of financial year 2025 to around 102 lakh by the end of financial year 2028. This translates into the addition of nearly 25.74 lakh new MSME beneficiaries.
As per data available with the Ministry of MSME, around 6.90 crore MSMEs currently generate employment for approximately 30.16 crore people, averaging 4.37 persons per enterprise. Based on this estimate, the addition of new MSME beneficiaries is expected to generate employment for around 1.12 crore people by the end of financial year 2027–28.
The Cabinet noted that SIDBI’s risk-weighted assets are expected to increase significantly over the next five years due to a greater focus on directed credit and the expansion of its lending portfolio. The development of digital and digitally enabled collateral-free credit products, along with venture debt offerings for startups, is also likely to add to the bank’s risk-weighted assets.
To maintain a healthy Capital to Risk-Weighted Assets Ratio (CRAR) and protect its credit rating, SIDBI will require additional capital. The government said the proposed phased equity infusion will help the bank maintain a CRAR above 10.50 per cent even under high-stress scenarios, and above 14.50 per cent under Pillar 1 and Pillar 2 norms over the next three years.
The infusion is expected to strengthen SIDBI’s balance sheet and enable it to support MSMEs with credit at competitive costs, the government said.
