Centre to infuse Rs 5,000 crore equity in SIDBI to enhance MSME credit

New Delhi: The central government on Wednesday announced a plan to infuse Rs 5,000 crore equity in Small Industries Development Bank of India (SIDBI), a move that would help enhance credit to micro, small and medium enterprises (MSMEs) and create new jobs.

The Union Cabinet, chaired by Prime Minister Narendra Modi, gave approval for capital infusion in SIDBI in three tranches with majority of the financial support being provided in the current financial year.

The central government through the Department of Financial Services (DFS) will provide Rs 3,000 crore capital support to SIDBI in the current financial year at the book value of Rs 568.65 per share as on March 31, 2025.

The DFS will also infuse 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 year, the Union Finance Ministry said in a statement after the cabinet approval.

The ministry claimed that the fresh capital infusion would significantly boost credit to the MSMEs.

Post equity capital infusion of Rs 5000 crore, number of MSMEs to be provided financial assistance is expected to increase from 76.26 lakh at the end of Financial Year 2025 to 102 lakhs (approximately 25.74 lakh new MSME beneficiaries will be added) by the end of Financial Year 2028, the Finance Ministry said.

As per latest data (as on September 30, 2025) available from the official website of the ministry of MSME, 30.16 crore employment is generated by 6.90 crore MSMEs.

“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 Financial Year 2027-28,” the Finance Ministry said.

The equity shares of SIDBI are held by the Government of India and banks / institutions owned by the Government of India and are not listed on any exchange.

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 start-ups, will further escalate the risk-weighted assets, requiring even more capital to meet healthy CRAR.

According to the Finance Ministry, 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 & Medium Enterprises (MSMEs) at competitive cost.

The proposed equity infusion in a phased manner will enable SIDBI to maintain CRAR above 10.50 per cent under high stress scenarios and above 14.50 per cent under Pillar 1 and Pillar 2 over next three years, it added.