India’s Funding Shift: Corporate Bonds Rise, Business Loans Hold MSME Ground

SEBI’s February 4, 2026 corporate bond outreach has reignited India Inc’s funding debate. Bonds are rising, but MSMEs still lean on loans.

SEBI Chairman Tuhin Kanta Pandey, speaking at the Inaugural Pan-India Outreach Program for Corporate Bonds on February 4, 2026, spotlighted a gap India cannot ignore. Big companies need longer-term capital and diversified funding, while India’s bond market still has limited issuer breadth and weak retail participation. 

Recent reporting around the event shows issuance volumes are growing, but investor awareness remains low. For MSMEs, bank and NBFC loans continue to be the default route, driven by working-capital cycles and smaller ticket sizes. 

The debate is not bonds versus loans. It is on which instrument fits which borrower, and how fast India can deepen market-based finance.

What Is Driving The Funding Debate Right Now?

SEBI’s outreach pitch is clear: India’s corporate bond market must widen beyond a small set of frequent issuers. Event coverage cited that India has 5,600+ equity-listed companies, but only about 770 entities have raised funds through corporate bonds, and just 272 have tapped it repeatedly.
 

At the same time, investor education is lagging. A report quoting a SEBI investor survey said awareness of corporate bonds is around 10%, while crypto awareness was cited at 15%. 

Quick snapshot, before the deeper numbers.
 

This split explains why bonds can expand fast for top-tier issuers, while loans remain the backbone for smaller firms.

SEBI’s Bond Push And What The Numbers Reveal

The corporate bond market’s growth is not theoretical. Coverage of Pandey’s February 4, 2026 address said issuers raised about ₹10 trillion via corporate debt in FY25, and about ₹6.8 trillion between April and December 2025. Outstanding corporate bonds were cited at around ₹58 trillion as of December 2025, and a long-term growth trend of about 12% CAGR over a decade. 

SEBI’s outreach focus also tracks the investor side. Market participation has risen sharply, but corporate bond awareness has not kept pace. One report cited unique investors across markets rising from 43 million in FY20 to 139 million, yet bond awareness stayed near 10%. 

A second data view helps put “bonds are the future” into proportion.
 

These figures come from NITI Aayog’s report PDF dated December 14, 2025.

After this table, the key point is simple. Bonds are growing quickly, but access is still uneven. That is why loans remain a practical route for MSMEs.

What Happened Earlier And Why Loans Still Win For MSMEs?

Policy narrative around corporate bonds strengthened in late 2025. The Press Information Bureau said NITI Aayog’s report titled “Deepening the Corporate Bond Market in India” was released on December 11, 2025. 

Another Economic Times report said NITI Aayog backed reforms to potentially expand the corporate bond market to ₹100–₹120 lakh crore by 2030, alongside policy and tax-related suggestions.

Still, MSMEs do not shift funding channels overnight. Loans work because working capital is messy, cash flows are seasonal, and ticket sizes are small. Loans can be structured as cash credit, OD, term loans, and blended facilities. Bonds usually need scale, strong disclosures, and steady investor demand.

For a lending-side view in plain language, LoansJagat also tracked the corporate lending theme on October 6, 2025.

What Stakeholders Are Saying?

Pandey has stressed the need to widen issuer participation and investor understanding, with outreach as a direct tool to deepen the corporate bond market. NITI Aayog has signalled that structural reforms could materially expand the market by 2030. 

Conclusion

Corporate bonds are clearly gaining ground for large, well-rated issuers. For MSMEs, business loans remain the most workable option, especially for working capital and smaller borrowing needs.