Sebi may list muni-bonds to tap household savings

To help channelise household savings and provide a new investment avenue, market regulator Sebi will soon come out with a new set of norms to enable issuance and listing of municipal bonds — a popular financial product in developed countries like the US. Under the proposed framework currently under consideration of Sebi, municipal bonds would be debt securities issued by states, cities and other government entities which will use the money for infrastructure developments like buildings, schools, highways, hospitals, sewage systems and other projects for the public good.

An internal Sebi panel, the Corporate Bonds and Securities Advisory Committee (CoBoSAC) had constituted a sub-committee for specifying the disclosure and other requirements for issuance and listing of municipal bonds. It has submitted its report to the CoBoSAC, whose recommendations would form the basis to draft norms for way ahead of these bonds and the final guidelines would be put in place after going through a public consultation process on the draft norms.

Commonly known as ‘muni bonds’, these investment products are very popular among investors in many developed nations, especially the United States, where muni bonds have attracted investments totalling over USD 500 billion and are among preferred avenues for household savings. These bonds can be issued by urban local bodies to finance infrastructure such as water supply and sanitation.

They serve as an efficient tool for local bodies to mop up funds and can be extensively tapped to meet funding needs of urbanisation, while providing a new investment avenue to the public and institutional investors. The market for ‘muni bonds’ is yet to take off in India even though a few municipalities here have offered such products in the past. Ahmedabad Municipal Corporation was the first to launch such a bond way back in 1998.