New Delhi: The Union cabinet on Wednesday approved an equity infusion of ₹5,000 crore into the Small Industries Development Bank of India (SIDBI). The move is aimed at strengthening the lender’s capital base and significantly expanding the flow of credit to micro, small and medium enterprises (MSMEs), according to a statement released by the cabinet secretariat.
The department of financial services will provide the capital support in three tranches, with ₹3,000 crore to be infused in FY26 at the book value as of 31 March 2025, followed by ₹1,000 crore each in FY27 and FY28 at the prevailing book value at the end of the preceding financial year.
In a related development, the cabinet approved the continuation of the Atal Pension Yojana (APY) up to FY31, and extended government funding for promotional and developmental activities and gap funding to ensure the scheme’s long-term viability. Launched in 2015 to provide income in old age to workers in the unorganised sector, APY offers a guaranteed monthly pension of ₹1,000 to ₹5,000 from the age of 60, based on subscriber contributions. As of 19 January, the scheme has more than 86.6 million subscribers.
According to the government statement following the equity infusion, the number of MSMEs receiving financial assistance from SIDBI is expected to rise from 7.62 million at the end of FY25 to about 10.2 million by FY28, translating to nearly 2.57 million new beneficiaries. Based on MSME ministry data indicating an average of 4.37 employees per MSME, the additional lending is estimated to support employment for around 11.2 million people by the end of FY28.
Digital upgrade incoming
The decisions of the Union cabinet, chaired by Prime Minister Narendra Modi, are especially significant considering the government is planning a massive digital upgrade of the MSME sector. This is part of a broader push to align domestic manufacturing with global quality and sustainability standards to improve export competitiveness and reduce shipment rejections, as Mint reported on 20 January. India’s MSMEs contribute around 30% of gross domestic product and nearly 45% of total exports.
The move is driven by a sharp increase in SIDBI’s risk-weighted assets as the institution scales up directed credit, digitally enabled collateral-free lending products, and venture debt for startups. Maintaining a strong capital to risk-weighted assets ratio (CRAR) is critical for preserving SIDBI’s credit rating and ensuring it can raise funds at competitive rates.
The government said the infusion would help SIDBI keep its CRAR comfortably above regulatory thresholds, allowing it to mobilise resources at lower costs and pass on the benefit through cheaper and more accessible credit to MSMEs, a segment seen as central to jobs, exports and economic growth.
In a written reply to a question in the Lok Sabha in December, minister of state for MSMEs Shobha Karandlaje said the number of MSMEs registered on the Udyam registration portal and the Udyam assist platform was about 72 million at the end of November 2025. Maharashtra has the largest number of registered MSMEs at around 9.4 million, followed by Karnataka with about 6.7 million, Tamil Nadu with about 6 million, Uttar Pradesh with about 4.6 million, and Gujarat with about 4.1 million.