In a major push to support small businesses, the Union Cabinet chaired by Prime Minister Narendra Modi has approved an equity support of ₹5,000 crore for the Small Industries Development Bank of India (SIDBI). This move is expected to strengthen credit flow to micro, small and medium enterprises (MSMEs) across the country.
Small Industries Development Bank of India (SIDBI) is India’s principal financial institution for promoting, financing, and developing the Micro, Small and Medium Enterprise (MSME) sector, acting as an apex body under the Ministry of Finance to provide credit, build capacity, and coordinate efforts for small businesses to become globally competitive. Established in 1990, it offers various financial products, development support, and policy inputs to bridge financial and developmental gaps for MSMEs.
The government will infuse this ₹5,000 crore equity capital into Small Industries Development Bank of India in three phases. Out of this, ₹3,000 crore will be provided in the financial year 2025–26, while ₹1,000 crore each will be infused in 2026–27 and 2027–28. The investment will be made at the book value applicable for each respective year.
With this capital support, SIDBI is expected to significantly expand its reach. The number of MSMEs receiving financial assistance is projected to rise from around 76 lakh in 2025 to nearly 1.02 crore by 2028. This means about 25.7 lakh new MSMEs are likely to benefit from SIDBI’s support in the coming years.
This expansion is also expected to create large-scale employment. As per official MSME data, every MSME generates employment for an average of over four people. Based on this, the additional MSMEs supported through this equity infusion could generate around 1.12 crore new jobs by the end of the 2027–28 financial year. As per latest data (as on 30.09.2025) available from official website of M/o MSME, 30.16 crore employment is generated by 6.90 crore MSMEs (i.e. employment generation of 4.37 persons per MSME).
The government noted that SIDBI’s focus on priority lending, digital and collateral-free loans, and venture debt for startups will increase its risk-weighted assets over time. To manage this growth safely, SIDBI needs strong capital support to maintain a healthy Capital to Risk-weighted Assets Ratio (CRAR).
Maintaining a strong CRAR is crucial for protecting SIDBI’s credit rating and ensuring it can raise funds at reasonable interest rates. With this equity infusion, SIDBI is expected to keep its CRAR well above the required levels, even under stress conditions. This will allow the bank to offer affordable credit to MSMEs and support entrepreneurship, innovation, and economic growth in a sustainable way.
Overall, the Cabinet’s decision is seen as a big boost for MSMEs, startups, and job creation, reinforcing the government’s focus on strengthening India’s small business ecosystem.
