Municipal corporation Bonds

Municipal corporations are government bodies categorized in the third tier of the government in urban areas. The municipal bodies provide services like water, sanitation, and sewage. They have their own expenditures and sources of revenue.

Key Points

  • Apart from their conventional sources of revenue like property tax, government grants, and service fees, they can also raise funds through issuing bonds called ‘Municipal Corporation Bonds’.
  • The process of issuing bonds by such civic bodies started in the year 1997.
  • Recently, several civic bodies began issuing bonds to raise funds for the AMRUT scheme. The Central Government announced incentives for municipal bodies raising funds through municipal bonds.
  • As these are not backed by a sovereign guarantee and have higher interest rates than the state development bonds.

How Municipal Bonds are serviced?

The municipal bodies keep an amount aside from their property tax collections in a month for the repayment of interest and principal amount. Typically, the interest payment is half-yearly and many of the municipal bond issuances have their own structured repayment pattern.

How does listing help?

Listing of bonds makes them transparent and the information flow is also ensured to the investors. The listing also increases reliability.

Bonds of Lucknow Municipal Corporation listed on BSE

Lucknow’s Municipal Corporation Bonds have been listed on the Bombay Stock Exchange. Lucknow Municipal Corporation (LMC) became the first such civic body to have bonds worth Rs 200 crore listed at the Bombay Stock Exchange.

The bonds of LMC have a tenure of 10 years and will provide an interest rate of 8.5% per annum.

AMRUT

Atal Mission for Rejuvenation and Urban Transformation (AMRUT) was launched in the year 2015 by PM Modi for establishing an infrastructure for ensuring an adequate supply of water, proper sewerage connection, and urban transport. Rajasthan was the first state to submit an action plan for AMRUT.

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