New Delhi: The Union Cabinet has approved Rs 10,000 crore for a new fund called the SME Growth Fund. The money will be put into small and medium businesses that are ready to grow. The decision was taken on Tuesday, 6 October 2026, at a meeting chaired by Prime Minister Narendra Modi. The Press Information Bureau (PIB), the government’s official news agency, shared the details the same day.
The fund was first announced in the Union Budget for 2026 to 27. With the Cabinet’s nod, the plan can now move ahead.
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What the Cabinet decided
The Cabinet approved the Government of India’s commitment of Rs 10,000 crore towards setting up the SME Growth Fund. In short, it is called the SGF.
SME stands for Small and Medium Enterprises. These are businesses that are bigger than tiny shops or home units, but smaller than large companies.
The government said the fund will help create “champion” Indian firms. These are companies that can grow strong and compete with the best in the world. The fund will look at firms in manufacturing, services, technology, new ideas and important supply chains.
The Cabinet took more decisions at the same meeting. You can read about another recent Cabinet decision in our story on the new MSP for six rabi crops.
How the fund will work
The money will go in as equity, not as loans.
What is equity?
Equity means owning a part of a business. When a fund puts money into a company as equity, it gets a share in that company. The company does not have to pay the money back every month like a loan. Instead, the fund gains if the company grows and becomes more valuable.
The government called this “patient” capital. Capital is simply money used to run or grow a business. Patient capital is money that stays in a business for a long time. It does not ask for quick returns.
What is an Alternative Investment Fund?
The Rs 10,000 crore will go to an Alternative Investment Fund, or AIF, set up under the SGF plan. An AIF is a special kind of investment fund. It collects money and puts it into businesses or assets that are not regular shares on the stock market. It works a little like a mutual fund, but it is meant for bigger and more expert investors. If you want to know how regular funds work, see our simple guide on how to invest in mutual funds.
Why the government says this fund is needed
The government said SMEs are the backbone of the Indian economy. They create many jobs. They help with exports, which means selling goods to other countries. They also add to factory output and new ideas.
But there is a problem. Many schemes have made it easier for these firms to get loans. Yet it is still hard for them to get long term money for big steps. Such steps include using new technology, building bigger factories, selling abroad, or buying another company.
The government also pointed to a gap in the funds that already exist. Most of the current funds that offer equity support focus on early stage businesses. Many of them mainly cover micro enterprises, which are the smallest units. So small and medium firms that have already proved themselves, and now want to grow, often miss out.
Union Minister Ashwini Vaishnaw briefed the media after the Cabinet meeting. As reported by The Hindu BusinessLine, he said the SGF is designed to fill this financing gap by giving patient growth equity capital to SMEs with high potential and proven business strength. The Economic Times reported that he said the fund will help SMEs use new chances created by the free trade agreements India has signed recently. A free trade agreement is a deal between countries that makes trade between them easier and cheaper.
Who will benefit
The government said most of the money from the fund will go to small and medium firms that focus on manufacturing. Manufacturing means making goods in factories.
The fund will also look at SMEs in industrial clusters in Tier II and Tier III cities. An industrial cluster is an area where many similar businesses work close to each other. Tier II and Tier III cities are smaller cities beyond the big metros like Delhi and Mumbai.
What the fund aims to achieve
According to the government, the long term money will help Indian SMEs to:
- Grow their operations and make more goods
- Invest in technology and bigger factories
- Sell in markets outside India
- Join global value chains, which are the steps by which a product is made across many countries
- Make strategic investments, such as buying or joining with other firms
The government said this will improve productivity and help Indian goods compete better in export markets. It hopes the fund will build a strong line of Indian companies that can become leaders in their fields.
The Budget for 2026 to 27 had a set of announcements to give equity, easy access to cash and expert support to the whole MSME sector. MSME means Micro, Small and Medium Enterprises. The SGF is one part of that plan. The government linked it to its goal of Viksit Bharat 2047, which means a developed India by the year 2047.
What happens next
The Cabinet has approved the money. The official release does not yet give details such as who will manage the fund, when it will start investing, or how a business can apply. Business owners should watch for updates from the Ministry of Finance and the Ministry of MSME.
Any equity investment carries some risk, because a business may not grow as planned. You can learn more in our explainer on what investment risk means.
FAQ
What is the SME Growth Fund?
It is a new fund backed by Rs 10,000 crore from the Government of India. It will put long term money into small and medium businesses as equity.
Is this a loan scheme?
No. The money will be given as equity, which means the fund takes a share in the business instead of giving a loan.
Which businesses will get most of the money?
Most of the money will go to small and medium manufacturing firms. The fund will also look at firms in industrial clusters in Tier II and Tier III cities.
Sources
- Press Information Bureau, Ministry of Finance: Cabinet approves Commitment of Rs 10,000 Crore towards establishment of the SME Growth Fund for direct equity investments in Small and Medium Enterprises to create future champions, 6 October 2026
- Press Information Bureau explainer: Small and Medium Enterprises (SME Growth Fund), 6 October 2026
- PM India (pmindia.gov.in): Cabinet decision on the SME Growth Fund, 6 October 2026
- The Hindu BusinessLine: Cabinet approves Rs 10,000 crore to establish SME growth fund, 6 October 2026
- The Economic Times: Cabinet approves Rs 10,000 crore SME Growth Fund and new authority to plan transport and logistics, 6 October 2026