Securities and Exchange Board of India (SEBI) chairman Tuhin Kanta Pandey on November 6 said he hopes that Finance Commission will give some incentives or guidance to the states or local bodies to raise funds from municipal bonds.
"I am hopeful that, the new finance commission will give some incentives or some guidance to states, local bodies to raise municipal bonds," Pandey told exclusively to Moneycontrol on the sidelines of the 12th SBI Banking and Economics Conclave in Mumbai.
The Finance Commission's role in municipal bonds market is largely through recommendations and incentives that support local government fiscal health, rather than directly issuing or managing the bonds.
He said that so far in last few years, municipal bonds worth of Rs 3,500 crore issuances have taken place.
Municipal bonds, though nascent, offer a direct route for cities to fund their own development, the SEBI chief added.
The government has also recently specified municipal debt securities as eligible for repo and reverse repo transactions, he added.
"They can now be used by banks and institutions for short term liquidity management. Their increased demand will empower our cities to fund their own development," Pandey said.
On sidelines, he added that the utilisation of municipal bonds in the repo and reverse repo will also allow them a great set of investment from banks in their issuances.
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