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Cabinet Approves ₹5,000 Crore Equity Boost for SIDBI to Fuel MSME Growth

The Union Cabinet has approved a Rs 5,000 crore equity infusion into the Small Industries Development Bank of India (SIDBI) to be provided in three tranches over the coming years. This capital support is expected to enable SIDBI to increase financial assistance, adding approximately 25.74 lakh new MSME beneficiaries by the end of FY 2027-28. The move is projected to generate an estimated 1.12 crore new jobs based on current MSME employment averages. The equity infusion is crucial for SIDBI to maintain a healthy Capital to Risk-weighted Assets Ratio (CRAR) as it expands its credit portfolio, including digital and venture debt products.

Key Points: ₹5,000 Crore Equity for SIDBI Approved to Support MSMEs

  • ₹5,000 crore equity support for SIDBI
  • Aim to add 25.74 lakh new MSME beneficiaries
  • Estimated 1.12 crore new jobs generated
  • Infusion to maintain healthy bank capital ratios
  • Staggered funding over three financial years
2 min read

Cabinet approves Rs 5,000 crore equity support for SIDBI

Union Cabinet approves Rs 5,000 crore equity infusion into SIDBI to boost credit flow to MSMEs, aiming to add 25.74 lakh new beneficiaries and generate 1.12 crore jobs.

"employment generation is estimated to be 1.12 crore with the expected addition of 25.74 lakh new MSME beneficiaries - Finance Ministry statement"

New Delhi, Jan 21

The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday approved equity support of Rs 5,000 crore to Small Industries Development Bank of India.

"The equity capital of Rs 5,000 crore shall be infused into SIDBI by the Department of Financial Services (DFS) in three tranches of Rs 3,000 crore in financial year 2025-26 at the book value of Rs 568.65 as on March 31, 2025 and Rs 1,000 crore each in financial years 2026-27 and 2027-28 at the book value as on March 31 of the respective previous financial years," according to a Finance Ministry statement.

After equity capital infusion of Rs 5,000 crore, the number of MSMEs to be provided financial assistance is expected to increase from 76.26 lakh at the end of the financial year 2025 to 102 lakh, adding approximately 25.74 lakh new MSME beneficiaries by the end of the financial year 2028.

According to the latest data (as on September 30, 2025) available from the official website of the Ministry of MSME, employment for 3016 crore people has been generated by 6.90 crore MSMEs. This works out to an employment generation of 4.37 persons per MSME. Considering this average, employment generation is estimated to be 1.12 crore with the expected addition of 25.74 lakh new MSME beneficiaries by the end of the financial year 2027-28, the statement explained.

With a focus on directed credit and anticipated growth in that portfolio over the next five years, the risk-weighted assets on SIDBI's balance sheet are expected to rise significantly. This increase will necessitate higher capital to sustain the same level of Capital to Risk-weighted Assets Ratio (CRAR).

The digital and digitally-enabled collateral-free credit products being developed by SIDBI, aimed at boosting credit flow, along with the venture debt being offered to startups, will further escalate the risk-weighted assets, requiring even more capital to meet healthy CRAR, the statement said.

A healthy CRAR, well above the mandated level, is a key to protect credit rating. SIDBI will benefit from an infusion of additional share capital by maintaining a healthy CRAR. This infusion of additional capital would enable SIDBI to generate resources at fair interest rates, thereby increasing the flow of credit to Micro, Small and Medium Enterprises (MSMEs) at competitive cost.

The proposed equity infusion in a staggered or phased manner will enable SIDBI to maintain CRAR above 10.5 per cent under a high stress scenario and above 14.5 per cent under Pillar 1 and Pillar 2 over the next three years.

- IANS

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Reader Comments

P
Priyanka N
The numbers are impressive - 25 lakh+ new MSMEs and over 1 crore jobs! My only hope is that this support actually reaches the grassroots level and small entrepreneurs in tier-2 and tier-3 cities, not just the established players. The focus on digital collateral-free products is promising.
A
Aman W
Good initiative, but the execution will be key. We've seen schemes before where the paperwork and bureaucracy become hurdles. SIDBI needs to ensure the process is simple and transparent. Also, hope they support innovative startups with this venture debt.
S
Sarah B
As someone who works with small businesses, this is very welcome news. Access to affordable capital is the single biggest challenge for most MSMEs. The phased infusion shows good financial planning to maintain SIDBI's health. Hope it translates to real growth on the ground.
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Karthik V
₹5000 crore is a significant amount. While the intent is good, I respectfully question if this is the most efficient use of taxpayer money. Could direct tax benefits or easier compliance for MSMEs have a similar impact without the government taking on more equity risk? The job creation estimates seem optimistic.
M
Meera T
This is exactly what we need for 'Make in India' to succeed! When small industries get funding, they can scale up, hire more people, and contribute to exports. The focus on maintaining a healthy CRAR is also crucial for long-term stability. A step in the right direction! 🙌

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