Why in the News?
The Union Cabinet has approved an equity infusion of INR 5,000 crore into Small Industries Development Bank of India to strengthen MSME credit flow and institutional capital.
Key Decision
- Approved by the Union Cabinet, chaired by Narendra Modi
- Capital support to be provided by the Department of Financial Services
- Objective: Boost MSME lending, improve capital adequacy, and enable low cost funding
Equity Infusion Details
- Mode: Equity infusion in three tranches
- INR 3,000 crore in FY 2025–26 at book value of INR 568.65 per share (as on March 31, 2025)
- INR 1,000 crore in FY 2026–27
- INR 1,000 crore in FY 2027–28
- Later tranches to be infused at book value as on March 31 of the preceding financial year
Why Capital Infusion is Needed?
- Expansion of directed credit
- Growth in digital collateral free lending
- Increase in venture debt financing for startups
- These segments raise risk weighted assets, requiring stronger capital buffers
- Helps maintain credit rating and comply with regulatory norms
About SIDBI
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Prelims Pointers
- SIDBI is not a commercial bank, but a development financial institution
- Equity infusion helps meet Basel based capital requirements
- Focus areas include MSMEs, startups, and digital lending
- Nodal oversight lies with the Department of Financial Services
| [2023] Consider the following statements with reference to India:Â
1. According to the ‘Micro, Small and Medium Enterprises Development (MSMED) Act, 2006’, the ‘medium enterprises’ are those with investments in plant and machinery between Rs. 15 crore and Rs. 25 crore 2. All bank loans to the Micro, Small and Medium Enterprises qualify under the priority sector. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 |
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