Cabinet Approves INR 5,000 Cr Equity Infusion Into SIDBI to Boost MSME Credit

The Union Cabinet has approved an equity infusion of INR 5,000 crore into the Small Industries Development Bank of India, a move aimed at strengthening institutional capital and expanding credit availability for micro, small and medium enterprises.

The decision was taken at a meeting chaired by Prime Minister Narendra Modi and positions SIDBI to raise additional resources at competitive rates over the coming years.

The capital support will be provided by the Department of Financial Services in three tranches. An amount of INR 3,000 crore will be infused in the financial year 2025-26 at the book value of INR 568.65 per share as on March 31, 2025. The remaining INR 2,000 crore will be infused in equal tranches of INR 1,000 crore each in financial years 2026-27 and 2027-28 at the book value as on March 31 of the respective preceding financial year.

Post infusion, 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 about 1.02 crore by the end of financial year 2028. This implies the addition of nearly 25.74 lakh new beneficiaries. Based on official MSME ministry data which indicates average employment of 4.37 persons per enterprise, the additional beneficiaries are estimated to generate around 1.12 crore jobs by financial year 2027 28.

Officials said the equity support is critical as SIDBI’s balance sheet is expected to expand with higher risk weighted assets due to growth in directed credit, digital collateral free lending products and venture debt for startups. These segments typically require stronger capital buffers to maintain regulatory capital adequacy norms. As per the statements, the infusion will help SIDBI sustain a healthy capital base, protect its credit rating and support long term funding for MSMEs at reasonable costs.

The phased infusion is designed to help SIDBI maintain its capital to risk weighted assets ratio above 10.50 percent even under high stress scenarios and above 14.50 percent under regulatory Pillar 1 and Pillar 2 requirements over the next three years. This is expected to improve the bank’s ability to mobilise funds without significantly increasing borrowing costs.

Established in 1990, SIDBI plays a central role in India’s MSME financing ecosystem. Through direct lending and refinancing, it supports enterprises ranging from traditional small businesses to technology driven startups, making the latest equity support a significant intervention in MSME focused credit expansion.