The Union Cabinet approved Rs 10,000 crore to create an SME Growth Fund today. This fund provides equity capital to promising small and medium businesses, helping them scale and compete globally. The government said this initiative fills a gap in long-term risk capital, supporting innovation and growth for Indian entrepreneurs.
In a major boost to Small and Medium Enterprises, the Cabinet has approved Rs 10,000 crore to create an SME Growth Fund (SGF). The aim is to give equity capital, not just loans, to promising small and medium-sized businesses so they can grow into larger, globally competitive companies.
What is the SME Growth Fund?
The Union Cabinet, chaired by Prime Minister Shri Narendra Modi, today approved the Government of India's commitment of Rs.10,000 crore as part of the holistic set of announcements that were made in Union Budget 2026-27, focusing on providing equity, liquidity and professional support for the MSME ecosystem as a whole.
The government has made a commitment of Rs 10,000 crore to the Small and Medium Enterprises (SMEs) with a proven business model and potential to scale. The SMEs will receive it through an Alternative Investment Fund (AIF) set up under the SME Growth Fund framework. The fund will make direct equity investments in selected SMEs.
The SME Growth Fund is designed to address this critical financing gap by providing patient growth equity capital to high-potential SMEs with demonstrated business viability and scalability.
Why has the government launched the fund?
The government believes that while credit/loans are available for SMEs, there is a shortage of long-term equity or risk capital. "While various initiatives have enhanced access to credit for SMEs, a gap remains in the availability of long-term risk capital required by enterprises seeking to scale, innovate, expand internationally, adopt advanced technologies, undertake acquisitions, and transform into industry leaders," it said in a statement.
A majority of the fund will focus on small and medium manufacturing enterprises, including those operating in Tier-II and Tier-III industrial clusters. The funding will help SMEs expand operations, invest in technology and manufacturing capacity, enter international markets, join global supply chains and make strategic investments.
The initiative is part of the government's broader efforts to strengthen the SME sector through credit support, digitalisation, ease of doing business, public procurement reforms, startup support and PLI schemes. The Government reaffirms its commitment to empowering India's entrepreneurs and fostering a new generation of competitive enterprises. By catalysing investment in high-growth SMEs, the Fund will help create champions, drive innovation-led industrialisation, and generate quality employment opportunities across the country. The initiative will serve as a key pillar in advancing the vision of Viksit Bharat @ 2047," it said in a statement.