The Union Cabinet on Wednesday (January 21, 2026) approved an equity infusion of ₹5,000 crore into the Small Industries Development Bank of India (SIDBI) to expand the credit available to micro, small and medium enterprises (MSMEs).

The infusion will be made by the Department of Financial Services (DFS) in three tranches. Of the total amount, ₹3,000 crore will be infused in 2025-26 at a book value of ₹568.65 as on March 31, 2025, and ₹1,000 crore each in 2026-27 and 2027-28 at the book value prevailing at the end of the respective previous financial year.

More MSMEs set to benefit

“After the capital infusion, the number of MSMEs to be provided financial assistance is expected to increase from 76.26 lakh at the end of financial year 2025 to 102 lakh (approximately 25.74 lakh new MSME beneficiaries will be added) by the end of financial year 2027-28,” the government said in a release.

According to official data, as of September 30, 2025, around 6.9 crore MSMEs registered with the government employ 30.16 crore people. This works out to an average employment generation of 4.37 persons per enterprise, it said.

Based on this average, the addition of new MSME beneficiaries is estimated to generate employment for about 1.12 crore people by 2027-28. 

A strong CRAR

The government said that the additional capital infusion would be necessary to help SIDBI maintain a strong capital to risk-weighted assets ratio (CRAR), as its risk-weighted assets are expected to grow with increased lending to MSMEs.

“A healthy CRAR, well above the mandated level, is a key to protecting credit ratings,” the release said. “SIDBI will benefit 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 MSMEs at competitive costs.”