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Budget 2026: Rs 100 Cr Incentive for Large Municipal Bonds, Rs 10,000 Cr SME Fund

Finance Minister Nirmala Sitharaman has proposed a significant Rs 100 crore incentive to encourage large cities to issue municipal bonds worth over Rs 1000 crore. A separate Rs 10,000 crore SME growth fund was also announced to foster future champions in the micro, small, and medium enterprise sector. The budget includes measures to strengthen the TREDS platform, linking it to government purchases to facilitate cheaper financing for MSMEs. These initiatives aim to deepen the corporate bond market and provide sustained capital access to small businesses.

Key Points: Budget 2026: Big Incentives for Municipal Bonds & SME Growth Fund

  • Rs 100 cr incentive for large municipal bonds
  • Rs 10,000 cr SME growth fund proposed
  • TREDS platform mandated for MSME purchases
  • Credit guarantee for invoice discounting
2 min read

Budget 2026: Nirmala Sitharaman proposes Rs 100 crore incentive for single bond issuance of more than Rs 1000 crore to encourage Municipal Bonds

FM Nirmala Sitharaman proposes Rs 100 crore incentive for large municipal bond issuances and a Rs 10,000 crore SME growth fund in Union Budget 2026-27.

"To encourage the issuance of municipal bonds of higher value by larger cities, I propose an incentive of Rs 100 crore for a single bond issuance of more than Rs 1000 crore. - Nirmala Sitharaman"

New Delhi, February 1

During the presentation of the Union Budget 26-27, the Finance Minister, Nirmala Sitharaman, proposed to introduce a market-making framework with suitable access to funds and derivatives on corporate bond indices. She also proposed introducing total-return swaps for corporate bonds.

"To encourage the issuance of municipal bonds of higher value by larger cities, I propose an incentive of Rs 100 crore for a single bond issuance of more than Rs 1000 crore," The Minister said.

"The current scheme under Atal Mission for Rejuvenation and Urban Transformation (AMRUT), which incentivises issuances up to Rs 200 crore, will also continue to support smaller and medium towns," Sitharaman noted.

Earlier, the Finance Minister of India, Nirmala Sitharaman, proposed introducing a dedicated Rs 10,000-crore SME growth fund to create future jobs and incentivise enterprises based on select criteria. She stated that the government recognises MSMEs as a vital engine of growth, and proposes a three-pronged approach to help them grow as champions.

For equity support, "I propose to introduce a dedicated Rs 10,000 crores SME growth fund to create future champions, incentivising enterprises based on select criteria. I also propose to top up the self-reliant India fund set up in 2021 with Rs 2,000 crore to continue support to micro-enterprises and maintain their access to risk capital," she said.

More than Rs 7 lakh crore has been made available to MSMEs through liquidity support. "To leverage its full potential, I propose four measures. One: mandate TREDS as the transaction settlement platform for all purchases from MSMEs by CPSEs. Survey as a benchmark for other corporates. Two: introduce a credit guarantee support mechanism through CGT-MSC for invoice discounting on the TREDS platform. Three: link GEN with TREDS for sharing information with financiers about government purchases from SMEs, encouraging cheaper and quicker financing. Four: Introduce TREDS receivables as asset-backed securities, helping develop a secondary market, enhancing liquidity and settlement of transactions," the Minister said.

- ANI

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Reader Comments

P
Priya S
Good to see continued support for smaller towns under AMRUT as well. The focus shouldn't just be on metros. Tier-2 and Tier-3 cities need infrastructure funding too. The SME growth fund is also a welcome step for job creation. Overall, a balanced approach.
R
Rohit P
While the intent is good, I have a concern. Municipal bonds need strong governance and transparency. A big incentive is fine, but will our city corporations have the financial discipline to manage such large funds and repay investors? The framework is as important as the money.
S
Sarah B
The measures for MSMEs, especially linking government purchases with TREDS, are very practical. It should ease their cash flow problems significantly. If implemented well, this could be a game-changer for small businesses across India. The liquidity support number of ₹7 lakh crore is staggering!
V
Vikram M
Finally, a push for deeper corporate bond markets! Total-return swaps and asset-backed securities on TREDS receivables are sophisticated tools that can attract institutional investors. This budget seems to be laying the groundwork for a more mature financial ecosystem. Thumbs up from this side.
K
Kavya N
The budget sounds promising on paper. But as a common citizen, my question is simple: will this lead to better roads, water supply, and public transport in my city? Or will the funds get stuck in bureaucracy? Execution is key, Madam Finance Minister. We are watching.

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