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Government to pump ₹5,000 cr into India’s Small Business Development Bank to support MSMEs

Government to pump ₹5,000 cr into India’s Small Business Development Bank to support MSMEs

Yekkirala Akshitha
January 22, 2026

The Union Cabinet has approved an equity infusion of Rs.5,000 crore into the Small Industries Development Bank of India (SIDBI) to strengthen its capital base and expand credit support for Micro, Small and Medium Enterprises (MSMEs), which are increasingly recognised as the backbone of India’s economy. Following this infusion, approximately 25.74 lakh new MSME beneficiaries are expected to be added over the next three years. This move reflects India’s growing support for the MSME sector, which plays a critical role in economic growth, job creation, exports, and innovation , and is considered vital for the country’s overall development. The Department of Financial Services will provide the funds in three tranches: Rs.3,000 crore in Financial Year 2025-26 at a book value of Rs.568.65 per share as of 31 March 2025, followed by Rs.1,000 crore each in Financial Years 2026-27 and 2027-28 at the respective book values.

Established in 1990, SIDBI is India’s principal financial institution for promoting, financing, and nurturing MSMEs. It provides direct and indirect credit, refinance support, venture debt for startups, and digital credit products, aiming to enhance growth, competitiveness, and employment generation. SIDBI has significantly improved MSME access to finance, supported start-ups, promoted sustainable practices through green finance initiatives, and contributed to formalising micro enterprises, enabling them to become more competitive and productive.

After the infusion, the number of MSMEs receiving financial assistance from SIDBI is expected to increase from 76.26 lakh at the end of 2025 to 1.02 crore by the end of 2028 . Based on official data, 6.90 crore MSMEs currently generate employment for about 30.16 crore people , or an average of 4.37 persons per enterprise . Using this average, the addition of 25.74 lakh new MSME borrowers is expected to create around 1.12 crore jobs by 2027–28 , boosting livelihoods across semi-urban and rural areas.

SIDBI’s planned growth in direct credit and the development of digital, collateral-free credit products are expected to increase risk-weighted assets, making additional capital essential to maintain a healthy Capital to Risk-weighted Assets Ratio (CRAR). The phased equity infusion will help SIDBI maintain CRAR above 10.50% under high-stress scenarios and above 14.50% under Pillar 1 and Pillar 2 requirements over the next three years. This strong capital position will enable the bank to offer competitive credit rates, increase credit flow to MSMEs, and strengthen partnerships with commercial banks, NBFCs, and fintech platforms to broaden outreach and deepen financial inclusion.

The Cabinet’s decision highlights the government’s commitment to empowering MSMEs, supporting their growing economic importance, and reinforcing the sector as a key driver of India’s development, employment, and inclusive growth .