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Municipal bonds to fetch Rs 6,000 cr by FY20: Crisil report

The agency expects a gradual increase in investor interest in municipal bonds over the medium-term

Press Trust of India  |  Mumbai 

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are likely to raise Rs 6,000 crore through over the next three financial years - more than four-times of what they had mopped in the past two decades, says a report.

Between financial years 2011 and 2017, there were no issuances of municipal in the country.

"We expect Rs 6,000 crore of municipal to be issued over the next three financial years from progressive and proactive (ULBs), riding on policy and regulatory facilitations," Crisil said in a report today.

Government and market regulator have been working to improve ULBs' access to the capital markets

In June 2017, had notified guidelines on disclosure of financial information by at regular intervals, and audit of accounts to increase transparency, to improve the prospects for municipal

The government has also announced an interest subsidy scheme to make such issuances competitive.

The report said while the amount may seem small in the context of the massive infrastructure needs of the cities, it is more than four times what has raised --Rs 1,350 crore -- in the past 20 years. This June, Pune Municipal Corporation had raised Rs 200 crore from 10-year

The government moves to develop civic infrastructure through the Amrut and require significant capital spending by

The report estimates will have to borrow nearly Rs 15,000 crore to fund these projects through the financial year 2023. These will have to be funded by market borrowings in addition to government grants.

Several have initiated their bond issuance process by appointing transaction advisors, Subodh Rai of Crisil said, adding more such issuances are in the offing.

"That's because offer structuring flexibility through longer tenures, annual interest payments, and fixed coupon rates compared with bank loans," Rai said.

also has a large investor base and can turn out to be more competitive than bank borrowing," he said.

The agency expects a gradual increase in investor interest in municipal over the medium-term.

The implementation of guidelines will improve transparency and can go a long way in helping access the capital markets, it added.

First Published: Wed, November 29 2017. 18:51 IST