Union Budget 2026-27 offers monetary incentive for municipal bonds

The Union government has announced an incentive of Rs 100 crore for a single-bond-issuance of more than Rs 1,000 crore by a municipal corporation.

“To encourage the issuance of municipal bonds of higher value by large cities, I propose an incentive of Rs 100 crore for a single bond issuance of more than Rs 1,000 crore. The current scheme under AMRUT which incentivises issuances up to Rs 200 crore, will also continue to support smaller and medium towns,” said Union finance minister Nirmala Sitharaman in her Union Budget 2026-27 speech on February 1.

Experts say the increased incentives will encourage local bodies to raise money directly from the market instead of relying on the government. This will enhance discipline, performance and transparency in municipal bodies and bring Indian cities closer to the practices of developed countries.

A provision of Rs 100 crore has also been made for this scheme. It is an incentive scheme, which aims to promote the issuance of high-value municipal bonds by large cities.