Cabinet Approves ₹5,000 Crore Capital Support to SIDBI to Strengthen MSME Credit Flow

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The Union Cabinet has sanctioned a Rs 5,000 crore equity infusion into the Small Industries Development Bank of India (SIDBI) as a major step to reinforce financing for the MSME sector. Approved on 21 January 2026, the decision is intended to strengthen SIDBI’s capital base, enable higher credit flow to micro, small and medium enterprises, and ensure the institution remains financially resilient amid rising loan demand. The capital support will be extended in phases over three years, with Rs 3,000 crore to be infused in FY26 at a book value of Rs 568.65 per share, followed by two tranches of Rs 1,000 crore each in FY27 and FY28, ensuring a calibrated and fiscally responsible approach.

The enhanced capital position is expected to significantly widen SIDBI’s reach, increasing the number of MSMEs supported from 76.26 lakh in FY25 to nearly 1.02 crore by FY28, thereby bringing around 25.74 lakh additional enterprises into the formal credit system. Improved access to affordable finance will allow small businesses to scale operations, adopt new technologies, and meet working capital needs, reducing reliance on informal borrowing. Given the labour-intensive nature of MSMEs, the government estimates that the expanded lending capacity could lead to the creation of about 1.12 crore jobs by FY28. Overall, the equity infusion will help maintain SIDBI’s capital adequacy, safeguard its credit rating, and reinforce its role as the principal financial institution supporting India’s MSME-led growth.

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