Finance Minister Nirmala Sitharaman has called for Small Industries Development Bank of India (SIDBI) to evolve beyond its traditional role as an MSME anchor institution into a market-maker and risk-sharing partner for India's MSME and startup ecosystem. Speaking at SIDBI's 37th Foundation Day in Mumbai, Sitharaman emphasized that the institution must move 'beyond comfort zone' of being an anchor to small enterprises, urging SIDBI to expand its role to include deeper participation in startup financing, venture debt and innovative credit structures. The Finance Minister highlighted that SIDBI's role must now expand beyond conventional MSME lending to address the diverse financing needs of India's evolving business landscape, stating that 'standard products cannot serve non-standard businesses' and calling for customised credit structures aligned to enterprise business cycles. She also urged SIDBI to deepen the venture debt market for startups and expand cash flow-based lending and digital lending partnerships, particularly for first-time borrowers.
MSME lending is undergoing a fundamental transformation through data-driven credit assessment that moves beyond traditional credit checks to understand business health in real time. According to Mint reports, bank statement data emerges as one of the strongest sources, showing income and expenses, payment behaviour towards liabilities, and account balances. When combined with bureau data that provides information on past credit behaviour and existing loans, lenders gain a comprehensive view of borrower risk. Artificial intelligence is making this process stronger, analyzing large amounts of financial data quickly to identify patterns that manual underwriting may miss. AI-ML-led underwriting risk models can help identify predictable business cycles, making lending decisions smarter, faster, and more accurate. The approach supports responsible lending by understanding actual cash flows and avoiding over-lending, while enabling product customization that aligns with different business needs - from shorter cycles for traders to longer working capital support for manufacturers.
SIDBI is implementing a co-lending model with Regional Rural Banks (RRBs) to expand affordable MSME credit access across rural India. According to reports from The Hindu BusinessLine and ANI, SIDBI Chairman and Managing Director Manoj Mittal announced this initiative during the institution's 37th Foundation Day celebrations, stating that the project was conceptualised following directions from Finance Minister Nirmala Sitharaman during a review meeting of RRBs. SIDBI was tasked with creating a risk sharing mechanism with the RRBs, as Mittal explained, requiring convincing RRBs, regulatory approvals, creating loan policies for each RRB, and developing a friendly technology platform. The initiative has shown promising early results after conducting a pilot program with branches of three RRBs, with Mittal stating that the results have been quite encouraging and the institution plans to extend affordable MSME credit at scale to every corner of Bharat using 23 branches of RRBs. The SIDBI-RRB Co-Lending Platform has been specifically designed as a digital joint lending model to enhance MSME credit penetration in semi-urban and rural areas by combining SIDBI's MSME expertise and digital capabilities with the grassroots outreach of Regional Rural Banks.
Finance Minister Sitharaman launched several strategic digital platforms to strengthen the MSME ecosystem. The SIDBI MachFin Mart was introduced as a digital platform to help MSMEs access machinery through a structured marketplace supporting price discovery, standardisation and technology adoption. Additionally, the RRB Co-Lending Portal was launched to operationalize partnerships between SIDBI and Regional Rural Banks for improving credit flow in rural and underserved regions. A major initiative announced was MoRE (Modernisation of Rural Enterprises), a programme aimed at providing transformational support to 10,000 rural micro and artisanal units over the next three years through cluster-based interventions. These digital initiatives are designed to enhance last-mile credit delivery and accelerate the modernization of rural industries.
Highlighting the critical importance of MSMEs to India's economy, Finance Minister Sitharaman revealed that MSMEs contribute nearly 35 per cent of manufacturing output, 48 per cent of exports and around 31 per cent of India's GDP. She noted that the sector comprises over 7.47 crore entrepreneurs and provides employment to more than 32 crore people across the country. These figures underscore the scale and significance of the MSME sector in India's economic landscape, making the government's strategic focus on strengthening this ecosystem particularly crucial for overall economic growth and employment generation.
The Union Cabinet in January 2026 approved an additional equity infusion of ₹5,000 crore into SIDBI to strengthen its balance sheet and enable the institution to add 25 lakh new MSME beneficiaries by 2028. According to Sitharaman, by improving SIDBI's capital to risk-weighted assets ratio, we are ensuring that the institution can raise lower-cost funds and pass that benefit on to small entrepreneurs through wider, cheaper and more accessible credit. Looking ahead, SIDBI plans to significantly expand its partnerships with industry associations from the current 105 to 500 over the next two years as part of its developmental initiatives for the MSME sector. The enhanced capital support and strategic transformation position SIDBI to address the ₹8.1 lakh crore in delayed payments that remain a critical challenge for MSMEs across various sectors, with the government regularly reviewing payment timelines of central public sector undertakings to ensure MSME dues are cleared within the mandated 45-day period.
