Close to a dozen Indian cities are set to issue municipal bonds for the first time this
year, according to three merchant bankers, as a regulatory and
fiscal push boosts a fledgling market.
Authorities have long sought to push municipal bonds that
are typically used to finance urban projects ranging from
transportation to sanitation in the world’s most populous
country that is rapidly urbanising.
Investors are also gradually taking greater interest in the
market that was once plagued by concerns over opaque finances.
Over the past two years, regulators have pushed for regular
financial updates while the government has offered fiscal
incentives, boosting activity.
At least seven municipal bodies in the western Indian state
of Maharashtra are prepping issues worth at least ₹3,300 crore
rupees ($340.8 million), according to the merchant bankers, who
declined to be named as they are not authorised to speak to
media.
The cities include several that encircle the financial
capital Mumbai: Navi Mumbai, Panvel, Thane, Kalyan-Dombivli and
Mira-Bhayandar.
The Municipal Corporation of Greater Mumbai, the nation’s
richest local body, has yet to tap the bond market.
Ohers looking to sell bonds this year include Chhatrapati
Sambhaji Nagar and Nagpur in Maharashtra, Ujjain in central
India, and Shimla, Moradabad and Gorakhpur in north India.
None of the city corporations responded to Reuters’ emails
seeking comments.
“Overall, at least seven to 10 new issuers are likely to hit
the market in fiscal 2026-27, with a bond issuance pipeline of
at least ₹4000 crore already in place across public and
private placements,” said Umesh Khandelwal, chief business
officer at Tipsons Group, which acts as an arranger for sales.
So far, 22 cities from seven states in India have raised
around ₹4500 crore through bonds over the last nine years,
regulatory data shows.
India’s markets regulator plans to allow municipal bonds to
be issued for refinancing of loans and has permitted cities to
offer higher interest rates to senior citizens, women and retail
investors.
Finance Minister Nirmala Sitharaman had announced an
incentive of ₹100 crore for corporations issuing bonds
worth at least ₹1000 crore rupees.
The government also provides a subsidy for maiden bond
issues as well as a 2 percentage point interest support that
makes such borrowing cheaper.
Major investors in municipal bonds include the National Bank
for Financing Infrastructure and Development, banks and state
finance corporations, bankers said. NaBFID was the anchor
investor in some issues last fiscal.