Municipal Bonds on the Rise in India: A New Chapter for Urban Financing
MUMBAI, May 20 (Reuters) – This year, nearly a dozen cities in India are gearing up to issue municipal bonds for the very first time. This surge comes as there is increased regulatory and financial support for a growing market.
The Indian government has been actively promoting municipal bonds, which are essential for funding urban development projects, including transportation and sanitation. As India rapidly urbanizes, these bonds play a crucial role in supporting the necessary infrastructure.
Investor interest in municipal bonds is picking up as previous doubts about financial transparency lessen. Recent efforts by regulators have called for more consistent financial updates, and the government is providing fiscal benefits to encourage participation.
According to merchant bankers who chose to remain unnamed, at least seven municipal bodies in Maharashtra are preparing to issue bonds totaling around 33 billion rupees (approximately $340.8 million). This includes cities surrounding Mumbai, such as Navi Mumbai, Panvel, Thane, Kalyan-Dombivli, and Mira-Bhayandar. Interestingly, the Municipal Corporation of Greater Mumbai, one of the wealthiest local bodies in the country, has not yet entered the bond market.
Other cities planning to issue bonds this year include Chhatrapati Sambhaji Nagar and Nagpur in Maharashtra, as well as Ujjain in central India and Shimla, Moradabad, and Gorakhpur in northern India.
Despite reaching out, city corporations did not respond to inquiries for comments.
Umesh Khandelwal, chief business officer at Tipsons Group, stated, “We expect at least seven to ten new issuers in the fiscal year 2026-27, with a bond issuance pipeline already exceeding 40 billion rupees across various placements.”
In the last nine years, 22 cities across seven Indian states have raised around 45 billion rupees through bonds. Here’s a snapshot of the funds targeted by new issuers:
- Navi Mumbai: 10 billion rupees
- Thane: 10 billion rupees
- Nagpur: 5 billion rupees
- Panvel: 2 billion rupees
- Kalyan-Dombivli: 2 billion rupees
- Mira-Bhayandar: 2 billion rupees
- Chhatrapati Sambhaji Nagar: 2 billion rupees
- Ujjain: 2 billion rupees
- Shimla: 2 billion rupees
- Moradabad: 1 billion rupees
- Gorakhpur: 1 billion rupees
Total: 39 billion rupees
India’s markets regulator is also looking to enhance the scope of municipal bonds by allowing them to refinance existing loans and by permitting cities to offer better interest rates to senior citizens, women, and retail investors.
Finance Minister Nirmala Sitharaman has announced a 1 billion rupee incentive for corporations issuing bonds worth at least 10 billion rupees. Additionally, the government offers a subsidy on initial bond issues and a 2% interest support, which reduces borrowing costs.
Major investors in this space include the National Bank for Financing Infrastructure and Development, banks, and state finance corporations, with NaBFID serving as a key investor in some past issues.
($1 = 96.84 Indian rupees)
