Indian cities, as Economic Survey notes, are 'aspirational but exhausting'. A key reason is the poor state of infrastructure, itself rooted in weak municipal finances. To address this, the budget has proposed a ₹100 cr incentive for any municipal bond issuance above ₹1,000 cr by a city corporation, while continuing AMRUT (Atal Mission for Rejuvenation and Urban Transformation) support for smaller issuances up to ₹200 cr. This incentive encourages large cities to tap bond markets rather than rely solely on grants or bank borrowing. By lowering perceived risk and improving viability, the aim is to deepen the municipal bond market and strengthen transparency and fiscal discipline in urban financing.
While not new to India - the first bond was issued by Bengaluru in 1997 - the market remained dormant for years. Momentum has picked up of late. As of June 2025, 23 municipal bond issuances under Sebi's framework have mobilised almost ₹3,359 cr. Globally, municipal bonds - from East Asian transit systems to US water and sewer networks - have enabled resilient urban transitions. India's now shaping its own model. Nashik Clean Godavari bonds highlight how civic pride and environmental goals can align with market participation. Green and ESG-linked municipal bonds are emerging as the next frontier, with cities like Indore, Ghaziabad and Pimpri-Chinchwad seeing strong, often oversubscribed, demand under Sebi's green debt framework.
Basic challenges remain. Many ULBs are unrated or below investment grade, revenue autonomy is limited, and financial reporting is uneven. Addressing these gaps through better accounting standards, tailored credit ratings and possible tax incentives will be crucial to creating financially self-reliant, future-ready cities.
While not new to India - the first bond was issued by Bengaluru in 1997 - the market remained dormant for years. Momentum has picked up of late. As of June 2025, 23 municipal bond issuances under Sebi's framework have mobilised almost ₹3,359 cr. Globally, municipal bonds - from East Asian transit systems to US water and sewer networks - have enabled resilient urban transitions. India's now shaping its own model. Nashik Clean Godavari bonds highlight how civic pride and environmental goals can align with market participation. Green and ESG-linked municipal bonds are emerging as the next frontier, with cities like Indore, Ghaziabad and Pimpri-Chinchwad seeing strong, often oversubscribed, demand under Sebi's green debt framework.
Basic challenges remain. Many ULBs are unrated or below investment grade, revenue autonomy is limited, and financial reporting is uneven. Addressing these gaps through better accounting standards, tailored credit ratings and possible tax incentives will be crucial to creating financially self-reliant, future-ready cities.
