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SEBI frames new Rules for Municipal Bonds

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Market regulator Security and Exchanges Board of India (SEBI) framed a new set of rules for listing and trading of municipal bonds on stock exchanges. It will boost the centre’s ‘smart cities’ initiative and also helps to channel  the household investments into urban infrastructure development.

Issuing draft regulations for such municipal bonds, also known as ‘muni bonds‘, SEBI said that issuing authorities would need to contribute at least 20 per cent of the total project cost for which they wish to raise funds. Besides, these municipal authorities would need to have a strong financial track record and such bonds should have a minimum tenure of 3 years.

The Bangalore Municipal Corporation was the first municipal corporation to issue a municipal bond of Rs.125 crore with a State guarantee in 1997.

However, the access to capital market commenced in January 1998, when the Ahmedabad Municipal Corporation (AMC) issued the first municipal bonds in the country without State government guarantee for financing infrastructure projects in the city. AMC raised Rs.100 crore through its public issue.