In a major boost to Small Industries Development Bank of India (SIDBI), the union cabinet, chaired by Prime Minister Narendra Modi, on Wednesday approved an equity infusion of ₹5,000 crore in the financial institution. The equity infusion is set to strengthen credit flow to the micro, small and medium enterprises (MSME) sector.

The equity support will be provided by the Department of Financial Services (DFS) in a phased manner over three financial years, according to an official statement released by the union cabinet.

Of the total amount, ₹3,000 crore will be infused in FY26 at a book value of ₹568.65 per share as on March 31, 2025. The remaining ₹2,000 crore will be infused in two equal tranches of ₹1,000 crore each in FY27 and FY28, at the book value as on March 31 of the respective preceding financial years, the release noted.

Following the equity infusion, the number of MSMEs receiving financial assistance from SIDBI is expected to rise from 76.26 lakh at the end of FY25 to around 102 lakh by the end of FY28, translating into the addition of approximately 25.74 lakh new MSME beneficiaries.

As per data available with the Ministry of MSME as of September 30, 2025, 6.90 crore MSMEs generate employment for about 30.16 crore people, averaging 4.37 persons per MSME. Based on this average, the expected addition of 25.74 lakh MSMEs could result in employment generation of nearly 1.12 crore by the end of FY28.

“As per latest data (as on 30.09.2025) available from official website of M/o MSME, 30.16 crore employment is generated by 6.90 crore MSMEs (i.e. employment generation of 4.37 persons per MSME).  Considering this average, employment generation is estimated to be 1.12 crore with the expected addition of 25.74 lakh new MSME beneficiaries by the end of Financial Year 2027-28,” the release noted.

The government said SIDBI’s risk-weighted assets are expected to increase significantly over the next five years due to a focus on directed credit and anticipated growth in its lending portfolio. The expansion of digital and digitally enabled collateral-free credit products, as well as venture debt offerings to startups, is also expected to add to the bank’s risk-weighted assets, necessitating higher capital to maintain adequate capital adequacy levels.

The equity infusion is aimed at helping SIDBI maintain a healthy capital to risk-weighted assets ratio (CRAR), which is critical for protecting its credit rating. The phased capital support is expected to enable SIDBI to maintain a CRAR above 10.50% under high-stress scenarios and above 14.50% under Pillar 1 and Pillar 2 requirements over the next three years.

The government said the additional capital would allow SIDBI to raise resources at competitive interest rates, thereby enabling increased credit flow to MSMEs at lower costs.

Manoj Mittal, CMD, SIDBI, thanked the government of India for reposing its trust in the bank, stating, “I am confident that SIDBI will play a significant role in empowering the MSME sector, which has been rightly identified as a growth engine of the nation, to help achieve the goals of Viksit Bharat 2047.”

The bank also said it would strengthen the formalisation of informal micro enterprises (IMEs) and support ecosystem development through energy-efficient and cluster-based interventions. These initiatives will be carried out via financing as well as outreach programmes in partnership with industry associations.

Cabinet okay continuation of Atal Pension Yojana

In a separate development, the cabinet also approved the continuation of the Atal Pension Yojana (APY) up to FY 2030-31, along with an extension of funding support for promotional, developmental and gap-funding activities, reinforcing its commitment to social security for the unorganised workforce. Under the approved implementation strategy, government support will continue to fund awareness campaigns, capacity-building initiatives and outreach programmes to expand coverage among informal sector workers, while gap funding will be provided to meet viability requirements and ensure the long-term sustainability of the scheme.

Launched on May 9, 2015, APY aims to provide old-age income security to workers in the unorganised sector by offering a guaranteed minimum pension of ₹1,000 to ₹5,000 per month, commencing at the age of 60, depending on the subscriber’s contribution. As of January 19, 2026, the scheme has enrolled over 8.66 crore subscribers.