Cabinet Approves Rs 5,000 Crore Equity Infusion Into SIDBI To Boost MSME Lending

New Delhi, Jan 21 (KNN) The Union Cabinet, led by Prime Minister Narendra Modi, has approved a Rs 5,000 crore equity infusion into SIDBI to bolster its lending capacity to Micro, Small, and Medium Enterprises (MSMEs).

The Department of Financial Services (DFS) will infuse equity capital in three tranches: Rs. 3,000 crore in FY 2025-26 at the book value of Rs. 568.65 as of March 31, 2025, followed by Rs. 1,000 crore each in FY 2026-27 and FY 2027-28, based on the book value as of March 31 of the respective preceding financial year.

Expansion of MSME Beneficiaries

Following the equity infusion, SIDBI is projected to increase financial support from 76.26 lakh MSMEs in FY 2025 to around 102 lakh by FY 2028, adding roughly 25.74 lakh new beneficiaries. 

Based on the latest data as of September 30, 2025, showing 6.90 crore MSMEs employing 3,016 crore people, about 4.37 persons per MSME, the additional support could generate an estimated 1.12 crore new jobs by FY 2027–28.

Strengthening Capital Adequacy and CRAR

As SIDBI scales up directed credit and expands its portfolio over the next five years, risk-weighted assets (RWA) are expected to rise significantly. This increase will require higher capital to maintain a healthy Capital to Risk-weighted Assets Ratio (CRAR).

The bank is developing digital and digitally-enabled collateral-free credit products and offering venture debt to start-ups, which will further elevate RWA and the need for robust capital levels.

Maintaining a strong CRAR helps protect SIDBI’s credit rating, enables the generation of resources at competitive interest rates, and supports enhanced credit flow to MSMEs at affordable costs. 

The phased equity infusion will allow SIDBI to sustain a CRAR above 10.50 percent under high-stress scenarios and above 14.50 percent under Pillar 1 and Pillar 2 requirements over the next three years.

(KNN Bureau)