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Informist, Friday, Jun. 19, 2026

 

--SEBI OKs tweaks to norms for listing municipal debt securities 

--SEBI: Municipal debt norms tweaks to enable refinancing project debt 

--SEBI: New measures to boost retail participation in municipal debt 

--SEBI Chairman: Listed municipal debt market is in nascent stage 

NEW DELHI – The Securities and Exchange Board of India Friday approved amendments to regulations governing the issuance and listing of municipal debt securities, aiming to strengthen the municipal bond market and to encourage greater retail participation.

 

To attract a wider pool of retail investors, the regulator said the issuers will be permitted to offer incentives in the form of additional interest or a discount to the issue price to a certain category of investors, including senior citizens, women, serving and retired defence personnel, widows of defence personnel, and retail individual investors.

 

The amendments are also aimed at enabling municipalities to raise funds to refinance the existing debt of specific projects, the market regulator said. Municipalities will be required to disclose the existing loans being refinanced in the offer document or placement memorandum, enabling investors to assess the issuer's financial health and liquidity risk, SEBI said.

 

SEBI amended the rules to provide more clarity on pooled financing by municipalities. The existing framework already allows two or more municipalities to raise funds together through a pooled finance vehicle. Through this amendment, SEBI has now specified the disclosures that must be included in the offer document for such issuances.

 

SEBI also said the agreement between the pooled special purpose vehicle and the constituent municipalities, and the escrow account mechanism, should also be specified for clarity regarding the pooled finance arrangement and the repayment mechanism.

 

The face value or trading lot for municipal debt securities issued on a private placement basis should be INR 100,000 or INR 10,000. Municipal debt security issued at a face value of INR 10,000 should have a fixed maturity and be without any structured obligations, SEBI said. Further, SEBI has permitted electronic modes for advertising public issues. 

 

SEBI has relaxed timelines for post-issue financial disclosures by municipalities, citing the complexity and diverse nature of their operations. Municipalities will now get 60 days from the end of the half-year to submit unaudited financial results, up from 45 days earlier. For audited annual results, the deadline has been extended to 90 days after the end of the financial year, up from 60 days previously. "Given the complexity and diversity of operations of municipalities, compiling accurate and comprehensive financial and operational data within the prescribed timelines is a significant challenge," SEBI said. 

 

In the Budget for 2026-27 (Apr-Mar), the Centre proposed an incentive of INR 1 billion for single municipal bond issuances of over INR 10 billion, while smaller and medium funds of up to INR 2 billion will continue to be supported under the Atal Mission for Rejuvenation and Urban Transformation scheme

 

Addressing a press conference, SEBI Chairman Tuhin Kanta Pandey said that developing the municipal bond market will require several steps to make it more enabling for municipal bond issuers. He said that SEBI has held multiple meetings with state governments and municipalities to push the market. 

 

He said that several states are now coming forward to take steps and the challenge for municipal bonds is more on the supply side than on demand. "If municipalities come forward, investors will take it," he said. The municipal bond market in India is still at a nascent stage, Pandey added.  End

 

Reported by Vaishali Tyagi 

Edited by Saji George Titus

 

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