Govt to pump ₹5,000 cr into SIDBI to step up credit for MSMEs
Jan 21, 2026
Synopsis
The Union Cabinet has approved a Rs 5,000 crore equity infusion into SIDBI to boost credit for MSMEs. This capital, released over three years, aims to increase financial assistance recipients from 76.26 lakh to 1.02 crore by 2028, potentially creating over a crore new jobs.
The Union Cabinet on Wednesday approved the infusion of Rs 5,000 crore equity capital into Small Industries Development Bank of India (SIDBI), in a bid to increase flow of credit to MSMEs.
The cabinet, chaired by PM Narendra Modi, said that the funds will be released in three tranches. It will invest ₹3,000 crore in 2025-26 at the book value as on March 31, 2025, followed by ₹1,000 crore each in 2026-27 and 2027-28 at the book value of the respective previous financial years.
The equity will be provided by the Department of Financial Services.
After the infusion, the number of MSMEs receiving financial assistance from SIDBI is expected to increase from 76.26 lakh at the end of 2025 to 1.02 crore by the end of 2028. This means around 25.74 lakh new MSME beneficiaries will be added over the next three years.
Based on official data, 6.90 crore MSMEs currently generate employment for about 30.16 crore people, or an average of 4.37 persons per enterprise. Using this average, the addition of 25.74 lakh new MSME borrowers is expected to create around 1.12 crore jobs by 2027–28.
The government said SIDBI’s risk-weighted assets will rise over the next five years due to higher directed credit, digital and collateral-free loan products, and venture debt for startups. This will require more capital to maintain a healthy Capital to Risk-weighted Assets Ratio (CRAR).
A strong CRAR is needed to protect SIDBI’s credit rating and allow it to raise funds at fair interest rates. The equity infusion will help SIDBI keep its CRAR above 10.50% even under high stress and above 14.50% under regulatory norms over the next three years, as per the government statement.
[The Economic Times]
