Govt approves equity support of Rs 5,000 crore to SIDBI

• The Union Cabinet approved 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.

• It will invest Rs 3,000 crore in 2025-26 at the book value of Rs 568.65 as on March 31, 2025 and Rs 1,000 crore each in fiscal 2026-27 and 2027-28 at the book value as on March 31 of the respective previous financial year.

• 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.

• Post equity capital infusion of Rs 5,000 crore, 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 lakhs by the end of financial year 2028.

• The equity infusion is expected to generate 1.12 crore jobs, adding 25.74 lakh new MSME beneficiaries by the end of 2027-28.

Small Industries Development Bank of India (SIDBI)

• Small Industries Development Bank of India (SIDBI) was established under an Act of the Parliament in April 1990. 

• SIDBI is mandated to serve as the principal financial institution for executing the triple agenda of promotion, financing and development of the Micro, Small and Medium Enterprise (MSME) sector and coordination of the functions of the various institutions engaged in similar activities. 

• SIDBI aims to emerge as a single window for meeting the financial and developmental needs of the MSME sector to make it strong, vibrant and globally competitive.

• Since its inception in 1990, SIDBI has been instrumental in transforming the landscape of MSME financing.

• Over the past three decades, SIDBI has successfully implemented various initiatives and schemes aimed at providing financial assistance, capacity building, and technological support to MSMEs. 

• These initiatives have not only facilitated access to credit but have also enhanced the competitiveness and sustainability of MSMEs, thereby contributing significantly to the country's socio-economic progress.

The MSME financing agenda of SIDBI is discharged through the following interventions:

i) Direct Lending: Financial assistance is extended to MSMEs directly through SIDBI branch network through demonstrative lending products to fill existing credit gaps, which could be further scaled up by the banking ecosystem.

ii) Indirect Lending: Financial assistance is extended to banks, Non-Banking Financial Companies (NBFCs), New Age Fintech, Small Finance Banks (SFBs), and Microfinance Institutions (MFIs), which creates a multiplier effect and increases the flow of credit to MSMEs including underserved/unserved MSMEs.

iii) Micro Lending: To effectively and efficiently serve entrepreneurs, through partnerships, at the bottom of the pyramid, especially women and poor.

iv) Fund of Funds: To boost the entrepreneurial spirit, equity support is extended to startups through Alternate Investment Funds (AIFs) under Fund of Funds being operated by SIDBI on behalf of the government.

v) Infrastructure Development: To promote cluster development, SIDBI Cluster Development Fund (SCDF) has been set up to provide low-cost funding to state governments for infrastructure development in MSME clusters.

vi) Green Financing: New initiatives are being taken for extending assistance to projects in the field of clean energy, climate change, electrical vehicles, energy efficiency, etc under Green Financing.