Budget 2023: Municipal bonds get a boost as cities to be rewarded for improving credit worthiness

The Centre will recruit 38,800 teachers and support staff for 748 Eklavya Model Residential School in the next three years.

Presenting the Budget 2023, Finance Minister Nirmala Sitharaman on Febraury 1 said that the cities will be incentivised to improve their credit worthiness in order for them to issue municipal bonds.

In November 2022, a RBI report said that an under-developed municipal bond market is putting the local bodies in a spot in bridging their resource gap while forcing them to rely largely on loans from the central and state governments and borrowings from banks and financial institutions, the regulator said in its maiden report Thursday on municipal finances.

A municipal bond is a debt instrument issued by corporations under municipal laws with the permission of the respective state governments. The funds raised are used to finance projects for socioeconomic development such as building bridges, schools and hospitals.

Listing municipal bonds in the stock exchanges can pave the way for developing the much-needed secondary market for municipal bonds in India, the RBI report had said.