Why in News?
The Union Cabinet has approved a ₹5,000 crore equity infusion into Small Industries Development Bank of India (SIDBI) to expand institutional credit flow to Micro, Small and Medium Enterprises (MSMEs).
Description:
Key Terms:
- Equity Infusion: Capital support by the government to strengthen a financial institution’s balance sheet.
- MSMEs: Enterprises classified under the MSMED Act, 2006 based on investment and turnover.
- CRAR: Capital to Risk-weighted Assets Ratio; indicator of capital adequacy.
About SIDBI:
- Status: Principal Development Financial Institution (DFI) for MSME sector in India
- Established: 2 April 1990
- Legal basis: Small Industries Development Bank of India Act, 1989
- Headquarters: Lucknow, Uttar Pradesh
- Mandate:
- Promotion, financing and development of MSMEs
- Strengthen and facilitate credit flow to MSMEs
- Address financial and developmental gaps in MSME ecosystem
- Coordinate activities of institutions engaged in MSME financing
- Shareholding pattern: Central Government, 29 other institutions including Public Sector Banks (PSBs), Central Government–owned insurance companies
- Administrative oversight: Department of Financial Services, Ministry of Finance
Rationale for Infusion:
- Improve Capital to Risk-Weighted Assets Ratio (CRAR) and balance sheet strength
- Support expansion of risk-weighted assets (RWA)
- Enhance availability of affordable and timely credit to MSMEs
- Address persistent credit gap faced by small enterprises
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