Cabinet decision to add 25.74 lakh new MSME beneficiaries, generate over 1.12 crore jobs by FY 2027–28
NEW DELHI I In a major policy push to strengthen India’s Micro, Small and Medium Enterprises (MSME) ecosystem, the Union Cabinet chaired by Prime Minister Shri Narendra Modi on Tuesday approved an equity infusion of ₹5,000 crore into the Small Industries Development Bank of India (SIDBI). The decision is expected to significantly enhance the flow of affordable credit to MSMEs across the country and support employment generation on a large scale.
₹5,000 Crore Equity Infusion in Three Phases
As per the Cabinet decision, the equity capital will be infused by the Department of Financial Services (DFS) in a phased manner over three financial years. An amount of ₹3,000 crore will be infused in FY 2025–26 at the book value of ₹568.65 per share as on March 31, 2025. This will be followed by ₹1,000 crore each in FY 2026–27 and FY 2027–28, based on the book value as on March 31 of the preceding financial year.
This calibrated approach is aimed at strengthening SIDBI’s capital base while ensuring sustained financial stability over the medium term.
Massive Expansion in MSME Coverage
The impact of this equity support is expected to be substantial. Post infusion, the number of MSMEs receiving financial assistance from SIDBI is projected to rise from 76.26 lakh at the end of FY 2025 to 102 lakh by FY 2028. This means approximately 25.74 lakh new MSME beneficiaries will be added over the next three years.
According to the Ministry of MSME’s latest data (as on September 30, 2025), 6.90 crore MSMEs currently generate employment for about 30.16 crore people, averaging 4.37 persons per MSME. Applying this average, the addition of 25.74 lakh MSMEs is expected to generate nearly 1.12 crore new jobs by FY 2027–28, giving a significant boost to employment and livelihoods.
Strengthening SIDBI’s Capital Adequacy
The Cabinet noted that SIDBI’s risk-weighted assets are expected to rise sharply over the next five years due to increased directed lending to MSMEs, expansion of digitally-enabled collateral-free credit products, and growing venture debt support to start-ups. These developments necessitate higher capital to maintain a healthy Capital to Risk-weighted Assets Ratio (CRAR).
A strong CRAR is crucial for protecting SIDBI’s credit rating and ensuring access to low-cost funds. The approved equity infusion will help SIDBI maintain its CRAR above 10.50% even under high-stress scenarios, and above 14.50% under Pillar 1 and Pillar 2 norms over the next three years.
Cheaper Credit for MSMEs
With an improved capital position, SIDBI will be better placed to raise resources at competitive interest rates. This, in turn, will allow the bank to extend affordable and timely credit to MSMEs, reinforcing their role as the backbone of India’s economy.
The Cabinet’s decision is being seen as a strategic move to deepen financial inclusion, accelerate MSME-led growth, and support India’s broader goals of employment generation and economic resilience.
Table of Key Facts
| Key Fact | Details |
|---|---|
| Decision | Union Cabinet approved equity support to SIDBI |
| Date of approval | 21 Jan, 2026 |
| Chaired by | Prime Minister Shri Narendra Modi |
| Total equity infusion | ₹5,000 crore |
| Implementing ministry/department | Department of Financial Services (DFS) |
| Tranche plan | ₹3,000 crore in FY 2025–26; ₹1,000 crore in FY 2026–27; ₹1,000 crore in FY 2027–28 |
| FY 2025–26 infusion valuation | At book value ₹568.65 per share (as on 31.03.2025) |
| FY 2026–27 & FY 2027–28 valuation | At book value as on 31 March of the respective previous financial year |
| Expected MSMEs assisted (baseline) | 76.26 lakh (end of FY 2025) |
| Expected MSMEs assisted (target) | 102 lakh (end of FY 2028) |
| New MSME beneficiaries to be added | Approximately 25.74 lakh |
| MSME employment benchmark used | 4.37 persons per MSME (based on official MSME data as on 30.09.2025) |
| Estimated new employment | ~1.12 crore jobs by end of FY 2027–28 (based on 25.74 lakh new MSMEs × 4.37) |
| Why capital is needed | Risk-weighted assets expected to rise due to directed credit growth, collateral-free digital products, and venture debt to start-ups |
| CRAR objective | Maintain healthy Capital to Risk-weighted Assets Ratio to protect credit rating |
| CRAR under high-stress scenario | Expected to remain above 10.50% (next three years) |
| CRAR under Pillar 1 & Pillar 2 | Expected to remain above 14.50% (next three years) |
| Expected outcome for MSMEs | Higher flow of credit at competitive cost as SIDBI can raise funds at fair rates |
