The Union Cabinet has approved an equity support of Rs 5,000 crore to the Small Industries Development Bank of India (SIDBI). The additional capital base will increase SIDBI’s credit disbursements to Micro, Small and Medium Enterprises (MSMEs).
In a statement, the Union Cabinet said the Rs 5,000 crore loan will be disbursed by the 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.”, the statement added.
Significance of capital infusion
The Cabinet said that the latest infusion will help SIDBI disburse loans to a larger number of beneficiaries, thereby giving impetus to small industries and contributing to new job creation. The statement said that through the latest capital infusion, approximately 25.74 lakh new MSME beneficiaries will be aided.
In FY25, SIDBI provided financial assistance to about 76.26 lakh Micro, Small and Medium Industries. The latest capital infusion is expected to take the total number of beneficiaries to 102 lakh by the end of FY28.
Furthermore, SIDBI’s increased capital assistance is expected to generate 1.12 crore jobs through 6.90 crore MSMEs. According to the Ministry of MSME data, the sector employed about 30.16 crore people in Q2 FY26.
The Cabinet stated that, with a focus on directed credit and anticipated growth in that portfolio over the next five years, SIDBI’s risk-weighted assets are expected to rise significantly. This increase will necessitate higher capital to sustain the same level of Capital to Risk-weighted Assets Ratio, it said.
MSME credit growth
According to a SIDBI report, the commercial credit to the Micro, Small and Medium Industries grew by 13% YoY in FY25. As per the report, the total MSME credit exposure in FY25 stood at Rs 35.2 lakh crore.
As per the report, the public sector banks accounted for 60 per cent of fresh disbursements. Further, the manufacturing sector, which accounts for 34 per cent of MSSEs, was the recipient of 23 per cent of new loans.