Union Cabinet approves Rs 5,000 crore equity infusion into SIDBI to boost MSME credit, jobs.
Photo Credit: The Suncity News
New Delhi, January 21, 2026: The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved an equity infusion of Rs 5,000 crore into the Small Industries Development Bank of India (SIDBI) to strengthen credit flow to the Micro, Small and Medium Enterprises (MSME) sector.
The equity capital will be infused by the Department of Financial Services in three tranches.
An amount of Rs 3,000 crore will be invested in FY 2025-26 at a book value of Rs 568.65 per share as on March 31, 2025.
This will be followed by investments of Rs 1,000 crore each in FY 2026—27 and FY 2027—28, based on the book value as of March 31 of the respective preceding financial years.
MSMEs will get financial assistance after Union Cabinet approval:
Following the infusion, the number of MSMEs receiving financial assistance from SIDBI is expected to rise from 76.26 lakh at the end of FY 2025 to 102 lakh by FY 2028, adding approximately 25.74 lakh new MSME beneficiaries.
According to data available on the Ministry of MSME’s official website (as of September 30, 2025), 6.90 crore MSMEs currently employ 30.16 crore people, with an average of 4.37 jobs per MSME.
Based on this average, the addition of 25.74 lakh new MSMEs is expected to generate around 1.12 crore new jobs by the end of FY 2027-28.
With SIDBI’s growing focus on directed lending, digitally enabled collateral-free loans, and venture debt support for start-ups, the bank’s risk-weighted assets (RWAs) are expected to rise substantially over the next five years.
This will necessitate additional capital to maintain a robust Capital-to-Risk Weighted Assets Ratio (CRAR) and Capital Adequacy Ratio (CAR).
Maintaining a strong CAR well above regulatory requirements is essential for safeguarding SIDBI’s credit rating and enabling it to raise funds at competitive interest rates.
The Union Cabinet approved that equity infusion will help SIDBI sustain a CAR above 10.50 percent under high-stress scenarios, and above 14.50 percent under Pillar 1 and Pillar 2 norms over the next three years.
Boost for affordable MSME credit in the Union Cabinet meeting:
The phased capital infusion will enhance SIDBI’s ability to mobilize resources at reasonable costs and significantly expand the availability of affordable credit to MSMEs.
The move aligns with the government’s broader objective of strengthening India’s MSME ecosystem, supporting entrepreneurship, and generating large-scale employment.
EOM.
