Why in News?
Union Cabinet has approved a ₹5,000 crore equity infusion into SIDBI to enhance credit availability for MSMEs and ensure the institution maintains a strong financial position amid expanding lending operations.
- The infusion will strengthen SIDBI’s lending capacity.
- Helps maintain a healthy Capital to Risk-Weighted Assets Ratio (CRAR).
SIDBI (Small Industries Development Bank of India):
- Established in 1990 under an Act of Parliament.
- Acts as the principal financial institution for MSME promotion, financing, and development. Coordinates with other institutions involved in MSME financing.
- Plays a vital role in industrial growth, employment generation, and exports.
Capital to Risk-Weighted Assets Ratio (CRAR):
- Also known as Capital Adequacy Ratio (CAR).
- Measures a bank’s capital in relation to its risk-weighted assets (RWA). Indicates the financial strength and stability of a bank.
- A higher CRAR means better ability to absorb losses.
- Governed by Basel Accords issued by the Basel Committee on Banking Supervision (BCBS).
