Cabinet Approves Major Boost to MSME Credit and Extends Atal Pension Yojana Till FY31

In a significant policy decision aimed at strengthening economic growth and social security, the Union Cabinet has approved a ₹5,000 crore capital infusion into the Small Industries Development Bank of India (SIDBI) to expand credit access for micro, small and medium enterprises (MSMEs). Alongside this, the government has also extended the Atal Pension Yojana (APY) until the financial year 2030–31, reaffirming its commitment to old-age income security for workers in the unorganised sector.

Following the infusion, the ministry said that the number of MSMEs receiving financial assistance from Sidbi is expected to rise to about 10.2 million by the end of FY28, from 7.63 million at the end of FY25.(Photo: Wikipedia) | Business Standard

Strengthening the Backbone of the Economy

MSMEs are widely regarded as the backbone of the Indian economy, contributing substantially to GDP, exports and employment. However, limited access to affordable and timely credit has long constrained their growth potential. Recognising this challenge, the Cabinet’s decision to strengthen SIDBI’s capital base marks a strategic intervention to ease financing bottlenecks and support enterprise expansion.

The ₹5,000 crore equity infusion will be provided to SIDBI in a phased manner over the coming years. This additional capital will enhance the bank’s lending capacity, enabling it to extend greater financial support to MSMEs through direct lending as well as refinancing arrangements with banks and non-banking financial companies. By improving SIDBI’s capital adequacy, the move is expected to help the institution raise funds at more competitive rates, ultimately lowering borrowing costs for small businesses.

Expanding Credit Reach and Employment Opportunities

With the infusion in place, SIDBI is projected to significantly expand its outreach among MSMEs over the next few years. Government estimates suggest that millions of additional enterprises could gain access to formal credit, particularly first-time borrowers and small units operating in semi-urban and rural areas. Increased credit flow is also expected to have a multiplier effect on employment, as MSMEs typically generate jobs at a relatively low capital cost.

Beyond conventional lending, the strengthened balance sheet will allow SIDBI to scale up innovative financing instruments such as digital loans, collateral-free credit, and venture debt for startups. These measures align with the broader goal of fostering entrepreneurship, innovation and formalisation within the MSME ecosystem.

Atal Pension Yojana Extended for Social Security Continuity

In a parallel move focused on social welfare, the Cabinet approved the continuation of the Atal Pension Yojana until FY31. Launched in 2015, APY was designed to provide a guaranteed pension to workers in the unorganised sector who lack access to formal retirement benefits. The extension ensures continued government support for the scheme’s promotional activities and gap funding, which are essential for its long-term sustainability.

Under APY, subscribers receive a fixed monthly pension ranging from ₹1,000 to ₹5,000 after attaining the age of 60, depending on their contribution levels. Over the years, the scheme has seen steady growth in enrolments, reflecting rising awareness about retirement planning among low-income and informal workers. The extension is expected to further deepen coverage and reinforce confidence among existing and prospective subscribers.

A Balanced Push for Inclusive Growth

Taken together, the two Cabinet decisions represent a balanced policy approach that combines economic stimulus with social protection. While the SIDBI capital infusion focuses on boosting productivity, investment and job creation through stronger MSMEs, the extension of APY addresses the long-term financial security of workers who power the informal economy.

At a time of global economic uncertainty, these measures underline the government’s emphasis on inclusive and sustainable growth. By strengthening access to credit for enterprises and ensuring pension security for workers, the initiatives aim to create a more resilient economic framework that supports both present-day expansion and future stability.

The MGMM Outlook

The Cabinet’s approval of a ₹5,000 crore capital infusion into SIDBI addresses one of the most persistent challenges facing India’s MSME sector—limited access to affordable and timely credit. By strengthening SIDBI’s capital base, the decision is expected to unlock larger credit flows for micro and small enterprises, including first-time borrowers and units operating in semi-urban and rural regions. Enhanced lending capacity, coupled with lower borrowing costs and innovative financing tools such as digital and collateral-free loans, can significantly improve enterprise viability, support expansion, and generate employment at scale. This move reinforces the role of MSMEs as a key driver of productivity, exports, and grassroots economic activity.

The extension of the Atal Pension Yojana till FY31 complements this economic push by reinforcing social security for workers in the unorganised sector. With a guaranteed pension framework and continued government support, the scheme strengthens confidence in long-term financial planning among low-income earners who remain outside formal retirement systems. Together, these measures reflect a policy approach that links enterprise growth with worker welfare, ensuring that economic expansion is accompanied by greater financial stability and resilience for those who form the backbone of India’s economy.

(Sources: LiveMint, OpIndia, Business Standard)