Budget 2026: FM Nirmala Sitharaman Proposes Incentives for Municipal Bonds, Banking Sector Reforms

Incentive for Large Municipal Bond Issuances​

Finance Minister Nirmala Sitharaman on Sunday proposed an incentive of ₹100 crore for municipal corporations that undertake a single bond issuance exceeding ₹1,000 crore. The move is aimed at encouraging larger and more efficient fund raising by urban local bodies through the bond market.

Restructuring of REC and PFC Announced​

As part of the government’s efforts to strengthen public sector financial institutions, the Finance Minister announced the restructuring of REC Ltd and Power Finance Corporation. The restructuring is positioned as a step toward enhancing the role of these institutions in financing infrastructure and power sector development.

High-Level Committee on Banking for Viksit Bharat​

The Budget proposals also include the setting up of a high-level committee on “Banking for Viksit Bharat.” The committee will focus on aligning the banking system with India’s long-term development goals as the country moves toward higher economic growth and financial inclusion.

Strong Banking Sector and Rule Review​

In her Budget speech, the Finance Minister highlighted that India’s banking sector is marked by strong balance sheets and historic high profitability. She also proposed a review of the foreign exchange management framework related to non-debt instruments to ensure it remains aligned with evolving economic requirements.

Poverty Reduction Highlighted​

The Finance Minister stated that nearly 25 crore people have moved out of multi-dimensional poverty, underlining improvements in living standards and the broader impact of economic and social initiatives.