The Union Cabinet on October 6 approved a Rs 10,000 crore SME Growth Fund. The fund will invest directly in small and medium enterprises through equity. It will be structured as an alternative investment fund.

The fund was first announced in the Budget for 2026-27. It will focus on manufacturing units and enterprises in Tier-2 and Tier-3 cities. Officials said many growing firms struggle to raise equity because banks lend only against collateral.

Industry groups said the move fills a long-standing gap in startup finance. Equity funding will help small firms scale up, buy new machines and enter export markets. The government will appoint a professional manager to run the fund at arm’s length.

Details on the fund’s launch date and application process will be announced soon. Experts said the success of the fund will depend on quick and fair selection of firms. They also want clear exit rules for the investments.