Cabinet Approves ₹5,000 Crore Equity Support for SIDBI to Enhance MSME Credit & Jobs

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi has approved the equity support of ₹5,000 crore to Small Industries Development Bank of India (SIDBI).

The capital will be infused by the Department of Financial Services (DFS) in three distinct stages of ₹3,000 crore in the 2025-26 financial year, followed by ₹1,000 crore in each of the next two years. This move is designed strengthen SIDBI’s financial standing and ensure it can continue to support small businesses across the country.

The primary goal of this funding is to increase the flow of credit to Micro, Small & Medium Enterprises (MSMEs). “Flow of credit to MSMEs will increase as SIDBI will be able to generate additional resources at competitive rates,” according to a statement by the Union Finance Ministry.

With the help of the promised support, the number of MSMEs receiving financial assistance is expected to increase from 76.26 lakh at the end of Financial Year 2025 to 102 lakh by the end of the 2028 financial year. This implies that “approximately 25.74 lakh new MSME beneficiaries will be added” in the coming years.

Beyond just financial numbers, this initiative is expected to have a massive impact on the job market. The government estimated that about 1.12 crore jobs can be created, with the expected addition of 25.74 lakh new MSME beneficiaries by the end of 2027-28 financial year.

“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,” according to the statement by the Union Finance Ministry.

This move also prepares SIBDI for future challenges as it develops new digital, collateral-free credit products and offers venture debt to start-ups. These new services required the bank to maintain a healthy capital-to-risk ratio (CRAR). The government, in its news release, stated that “the proposed equity infusion in staggered or phased manner will enable SIDBI to maintain CRAR above 10.50% under high stress scenario,” ensuring the bank remains stable as it facilitates the growth of small business sector.

MSME Credit Gap Persists

Strengthening MSME credit remains a key policy priority in India. Despite improvements in formal credit access, the sector still faces a large credit gap, highlighting persistent financing challenges for small businesses.

According to a 2024-25 Annual Report published by SIDBI, even with rising credit flow, the MSME credit gap is still estimated at around ₹30 lakh crore, underlining the need for stronger support mechanisms.

The study further highlighted that timely and adequate credit access is a key challenge for the MSME sector.