The Union Cabinet, chaired by Prime Minister Narendra Modi, has recently approved an equity infusion of Rs 50 billion into the Small Industries Development Bank of India. The decision aims to strengthen SIDBI’s capital position and enhance the flow of affordable credit to micro, small and medium enterprises (MSMEs).

The equity support will be provided by the Department of Financial Services in a phased manner. An amount of Rs 30 billion will be infused in FY 2025–26, followed by Rs 10 billion each in FY 2026–27 and FY 2027–28, at the book value as of 31 March of the respective preceding financial years.

Following the capital infusion, the number of MSMEs receiving financial assistance is expected to rise from 7.6 million at the end of FY 2025 to around 10.2 million by FY 2028, adding nearly 2.5 million new beneficiaries. Based on current employment trends, this expansion is estimated to generate employment for around 11.2 million people by the end of FY 2027–28.

The Cabinet noted that SIDBI’s risk-weighted assets are expected to increase due to growth in directed credit, digital and collateral-free lending products, and venture debt for startups. Additional capital support will help the institution maintain a healthy Capital to Risk-weighted Assets Ratio, safeguard its credit rating and raise resources at competitive interest rates.

The approved equity infusion will enable SIDBI to sustain a CRAR above regulatory thresholds even under high-stress scenarios, supporting increased and cost-effective credit flow to MSMEs and reinforcing their role in India’s economic growth.