More than 25 lakh micro, small and medium enterprises (MSMEs) are likely to have better access to credit after the Union cabinet on Wednesday approved a ₹5,000 crore equity infusion into the Small Industries Development Bank of India (SIDBI), reinforcing the government’s push to deepen formal financing for small businesses.
Department of Financial Services (DFS), Ministry of Finance, will infuse the equity support of ₹5,000 crore in three tranches—₹3,000 crore in FY26, followed by ₹1,000 crore each in FY27 and FY28. The first tranche will be issued at a book value of ₹568.65 per share as on March 31, 2025, while the subsequent tranches will be priced at the book value as of March 31 of the preceding financial year.
“Post equity capital infusion of Rs. 5000 crore,the 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,” stated the release issued by the Ministry.
The credit push is also expected to boost the employment generation capacity of the MSMEs. As per the Ministry of MSME data, 6.9 crore MSMEs currently generate employment for around 30.16 crore people. With the additional credit support, the additional MSMEs are expected to generate an estimated 1.12 crore new jobs by FY28.
The equity infusion comes against the backdrop of a rising risk profile on SIDBI’s balance sheet. With a growing focus on directed credit, digitally enabled collateral-free loans, and venture debt for startups, the bank’s risk-weighted assets are projected to increase sharply over the next five years.
According to the government, 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). SIDBI is likely to benefit from an infusion of additional share capital by maintaining a healthy CRAR.