Government Boosts MSME Financing Through SIDBI and ECLGS 5.0
The Ministry of Finance announced significant initiatives to enhance credit flow to Micro, Small and Medium Enterprises (MSMEs) through the Small Industries Development Bank of India (SIDBI) and the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0.
SIDBI Expansion and Credit Growth
SIDBI has substantially expanded its nationwide presence by opening 71 new branches across India between April 1, 2024, and July 29, 2026, following the Union Budget Announcement for FY 2024-25. This expansion aims to serve major MSME clusters and provide direct credit to MSMEs. As of March 31, 2026, SIDBI's direct credit outstanding portfolio reached ₹51,687 crores, representing a significant 36.8% year-on-year growth from ₹37,781 crores as of March 31, 2025.
The bank's refinance assistance to Primary Lending Institutions (PLIs) also showed robust growth, with the refinance outstanding portfolio standing at ₹4,50,571 crore as of March 31, 2026, compared to ₹3,85,327 crore as of March 31, 2025, registering a 16.9% year-on-year increase.
Innovative Credit Delivery Mechanisms
SIDBI has launched several innovative products to reach underserved segments. The bank initiated a co-lending arrangement with Non-Banking Financial Companies (NBFCs) to provide affordable credit to smaller MSMEs, particularly new borrowers. During FY 2025-26, SIDBI expanded this approach by establishing co-lending arrangements with Regional Rural Banks (RRBs) to strengthen credit delivery in underserved and untapped areas.
Additional initiatives include the Prayaas Scheme, which facilitates access to affordable credit for informal micro-entrepreneurs/micro-enterprises (IMEs), with special focus on women and economically disadvantaged individuals. SIDBI also launched the GST Sahay app offering 'on tap' invoice-based (cash flow based) small value credit to micro enterprises using trade data and digital frameworks.
ECLGS 5.0 Scheme Details
The Government introduced ECLGS 5.0 in May 2026, which envisages additional credit flow of ₹2,55,000 crore for MSMEs, non-MSMEs, and scheduled passenger airlines. Under the scheme, MSMEs are eligible for additional credit up to 20% of the peak fund-based working capital outstanding during the fourth quarter of FY 2025-26.
The scheme provides 100% guarantee coverage to Member Lending Institutions (MLIs) toward the amount in default for additional credit facilities extended to eligible MSME borrowers. For scheduled passenger airlines, the guarantee coverage is 90%, and they are eligible for additional credit up to 100% of the total peak credit outstanding (both fund-based and non-fund-based) during the fourth quarter of FY 2025-26.
This information was formally presented by Minister of State in the Ministry of Finance Shri Pankaj Chaudhary in the Rajya Sabha on August 4, 2026.