Finance Minister Nirmala Sitharaman
Credit: PTI Photo
Bengaluru: In the Union Budget 2026-27, many long-awaited measures have been announced, including total return swaps and a market-making framework that will help deepen the corporate bond market.
On Sunday, 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 to introduce total return swaps on corporate bonds.
Experts said these measures will gradually reduce overreliance on bank financing. Jyoti Prakash Gadia, Managing Director, Resurgent India Limited, said these measures (total return swaps, incentives for larger municipal bond issuances) will gradually reduce overreliance on bank financing for both infrastructure and urban development.
To encourage the issuance of municipal bonds of higher value by large cities, the FM proposed 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, she said.
PwC stated that municipal bond-related measures are anticipated to be useful for facilitating funding for urban infrastructure.
Also, individual Persons Resident Outside India (PROI) will be permitted to invest in equity instruments of listed Indian companies through the Portfolio Investment Scheme. Experts said this direct investment in listed equities will improve liquidity.
"It is also proposed to increase the investment limit for an individual PROI under this scheme from 5% to 10%, with an overall investment limit for all individual PROIs to 24%, from the current 10%," the FM announced on Sunday.
Complementary financial market reforms - including strengthening corporate bond markets, introducing bond derivatives and incentivising large municipal bond issuances - will broaden funding avenues for NBFCs (Non-Banking Financial Company) and institutional borrowers. These measures clearly position NBFCs to play a central role in the next phase of India’s credit-led growth, said Arvind Kapil, MD and CEO of Poonawalla Fincorp.
Introduction of Total Return Swaps (TRS) into Indian financial markets can deepen liquidity and broaden investor access by allowing both domestic and global investors to gain exposure to Indian bonds without directly holding them, Sanjay Doshi, Partner and Head, Transaction Services and Financial Services Advisory, KPMG in India, said.
"This enhances risk‑management options, attracts foreign capital through easier participation channels like GIFT City, and supports the growth of India’s expanding credit and bond markets," he added.