Govt may rejig norms for municipal bonds
Considering to raise interest subvention cap beyond Rs26 cr per ULB
image for illustrative purpose
New Delhi: In a bid to promote issuance of municipal bonds, the government is considering a proposal to hike interest subvention from the present Rs 26 crore per urban local body (ULB).
Considering immense scope for expansion of municipal bond markets in a bid to develop world class urban infrastructure, there is a need to increase the ceiling of interest subvention from existing Rs 26 crore per urban local body, sources said. The interest subvention is provided to municipal bodies under Atal Mission for Rejuvenation and Urban Transformation (AMRUT) to make such municipal bonds or muni bonds more attractive. The Rs 26 crore is the maximum interest subvention an ULB can receive from the Ministry of Housing and Urban Affairs (MoHUA) for issuing municipal bonds.
The central government has extended the facility of 2 per cent interest subvention on such bond issues in order to incentivise this market and facilitate participation of more civic bodies. This interest subvention is on the total size of the bond issue by an ULB. For their first bond issuance, ULBs can receive incentives of up to Rs 13 crore for every Rs 100 crore raised, with a maximum cap of Rs 26 crore under the AMRUT 2.0.
