Boosting Urban Development: Government's Push for Municipal Bonds
The government is considering increasing interest subvention limits on municipal bonds to promote their use in urban development. Aimed at enhancing urban infrastructure, the proposal seeks to incentivize more urban local bodies to participate in the bond market. Despite previous efforts, greater participation is needed for significant progress.
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- India
The Indian government is contemplating raising the interest subvention limit on municipal bonds to encourage more urban local bodies (ULBs) to tap into this financing tool, sources revealed. Currently capped at Rs 26 crore per body, the proposal aims at fostering the municipal bond market for sustainable urban development.
Despite Securities and Exchange Board of India's (Sebi) guidelines for ULBs to raise funds through these bonds, market activity remains sluggish. Efforts by government bodies like AMRUT and the Smart Cities Mission to improve municipal infrastructure have not yet fully realized their potential in leveraging bond markets.
Enhancements, such as reducing the face value of bonds to Rs 10,000, have been made to attract retail investors. Moving forward, agencies like NaBFID could offer crucial services to help municipal corporations navigate statutory requirements and market dynamics, paving the way for a robust municipal bond market.
(With inputs from agencies.)
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