SIDBI to boost credit flow of MSMEs with strong equity support of Rs 5,000 crore

Small Industries Development Bank of India will receive ₹5,000 crore equity support from the Government through the Department of Financial Services in phased tranches to strengthen capital adequacy, boost credit flow to MSMEs, and support over 25 lakh new enterprises while maintaining a healthy CRAR.

NEW DELHI: The government under the Union Cabinet has approved the equity support of Rs 5,000 crore to Small Industries Development Bank of India (SIDBI). The equity capital of Rs 5,000 crore will be infused into SIDBI by the Department of Financial Services (DFS) in three tranches of Rs 3,000 crore in financial year 2025-26 at the book value of Rs 568.65 as on 31-03-2025 and Rs 1,000 crore each in financial year 2026-27 and FY 27-28 at the book value as on 31st March of the respective previous financial year.

There is expectation that MSMEs to be provided post equity capital infusion will increase from 76.26 lakh at the end of FY 2025 to 102 lakhs (approximately 25.74 lakh new MSME beneficiaries will be added) by the end of FY28. As per the latest data of September end quarter, available from official website of Ministry of MSME, 3,016 crore employment is generated by 6.90 crore MSMEs (i.e. employment generation of 4.37 persons per MSME). Employment generation with this average is estimated is to be 1.12 crore with the expected addition of 25.74 lakh new MSME beneficiaries by the end of FY2027-28.

With strong 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 sharply. The increase will facilitate higher capital to sustain the same level of Capital to Risk-weighted Assets Ratio (CRAR).

The digital and digitally-enabled collateral-free credit products being developed by SIDBI, aimed at boosting credit flow, along with the venture debt being offered to start-ups, will further escalate the risk-weighted assets, requiring even more capital to meet healthy CRAR.

This will benefit SIDBI from an infusion of additional share capital by maintaining a healthy CRAR. 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 proposed equity infusion in staggered or phased manner will enable SIDBI to maintain CRAR above 10.50% under high stress scenario and above 14.50% under Pillar 1 and Pillar 2 over next three years.