The union cabinet, chaired by PM Narendra Modi, has approved an equity support of Rs.5,000 crore to Small Industries Development Bank of India (SIDBI).

The equity capital of Rs. 5,000 crore will be infused into SIDBI by the Department of Financial Services (DFS) in three tranches of Rs. 3,000 crore in financial year 2025-26 at the book value of Rs. 568.65 as on March 31, 2025 and Rs.1,000 crore each in FY 2026-27 and FY 2027-28 at the book value as on March 31 of the respective previous financial year, an official release said on Wednesday.

Impact
After this equity capital infusion, the number of MSMEs to be provided financial assistance is expected to increase from 76.26 lakh at the end of FY 2025 to 102 lakhs by the end of FY 2028. In other words, about 25.74 lakh new MSME beneficiaries are expected to be added. As per latest data (as on 30.09.2025) available from the official website of the ministry of MSME, 30.16 crore employment is generated by 6.90 crore MSMEs (i.e., employment generation of 4.37 persons per MSME). 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 FY 2027-28.

Background
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.

A healthy CRAR, well above the mandated level, is a key to protect credit rating.  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 staggered or phased manner will enable SIDBI to maintain CRAR above 10.50% under high stress scenario and above 14.50% under Pillar 1 and Pillar 2 over next three years.