Cabinet Approves ₹5,000 Crore Capital Infusion into SIDBI to Deepen MSME Credit Access

In a move that signals renewed intent to strengthen the backbone of India’s economy, the Union Cabinet has approved a ₹5,000 crore equity infusion into the Small Industries Development Bank of India (SIDBI)—a decision that could reshape the credit landscape for millions of micro, small and medium enterprises across the country.

Chaired by Prime Minister Narendra Modi, the Cabinet’s approval comes at a time when MSMEs are not just seeking survival capital, but growth capital—credit that enables them to scale operations, adopt technology, formalise businesses, and create jobs. For India’s startup founders, small manufacturers, service providers and local entrepreneurs, this announcement goes beyond numbers on a balance sheet; it is about confidence, continuity, and access.

A phased capital push with a long-term vision

The ₹5,000 crore equity support will be infused into SIDBI by the Department of Financial Services (DFS) in a phased manner over the next three financial years. Of this, ₹3,000 crore will be infused in FY 2025–26 at a book value of ₹568.65 per share, calculated as on March 31, 2025. The remaining ₹2,000 crore will be provided in two equal tranches of ₹1,000 crore each during FY 2026–27 and FY 2027–28, based on the book value as on March 31 of the respective preceding financial years.

This structured infusion ensures that SIDBI’s capital base grows in step with its expanding lending activities, especially as demand for MSME credit continues to rise across sectors and regions.

A direct impact on MSMEs and livelihoods

The implications of this move are substantial. With the additional capital, the number of MSMEs supported by SIDBI is expected to grow from 76.26 lakh at the end of FY 2024–25 to nearly 102 lakh by FY 2027–28. This means around 25.74 lakh new MSMEs could gain access to institutional finance over the period.

Employment impact is equally significant. As per Ministry of MSME data (as of September 30, 2025), India’s 6.90 crore MSMEs together employ about 30.16 crore people—an average of 4.37 jobs per enterprise. Applying this benchmark, the addition of over 25 lakh MSMEs could translate into nearly 1.12 crore new jobs by FY 2027–28, making this decision a major catalyst for job creation at the grassroots level.

Why SIDBI needs this capital now

Over the past few years, SIDBI’s role has expanded well beyond traditional refinancing. The institution has increasingly focused on directed lending to MSMEs, digitally enabled and collateral-free credit products, and venture debt financing for startups. While these initiatives are critical for modernising MSME finance, they also increase SIDBI’s risk-weighted assets.

As SIDBI’s credit portfolio grows over the next five years, maintaining a strong Capital to Risk-weighted Assets Ratio (CRAR) becomes essential—not only to meet regulatory requirements but also to safeguard its credit rating. A healthy CRAR allows SIDBI to raise funds from the market at competitive interest rates, which directly impacts the cost of credit passed on to MSMEs.

Ensuring affordable and sustainable credit flow

The approved equity infusion is expected to keep SIDBI’s CRAR comfortably above the regulatory minimum of 10.50 per cent even under high-stress scenarios. It will also remain above 14.50 per cent under Pillar 1 and Pillar 2 norms over the next three years. This financial resilience gives SIDBI the flexibility to expand lending without compromising stability.

For MSMEs, this translates into better availability of affordable credit, deeper credit penetration in underserved segments, and improved access to formal financial systems—particularly for first-time borrowers and small entrepreneurs operating outside major urban centres.

Strengthening the MSME ecosystem

At its core, the Cabinet’s decision reinforces SIDBI’s position as the principal financial institution for India’s MSME sector. By strengthening its balance sheet, the government is enabling SIDBI to support entrepreneurship at scale, back innovation-led small businesses, and contribute meaningfully to inclusive economic growth.

For India’s startup and MSME ecosystem, this ₹5,000 crore push is not just an equity infusion—it is a long-term investment in jobs, resilience, and the country’s economic future.