The Securities and Exchange Board (Sebi) has urged pension funds and insurers to support municipal bond issuances to help develop this nascent market so that fund-starved civic bodies can be helped.
“I urge pension funds and insurance companies and others to look at increasingly supporting municipal bond issuances,” said Pramod Rao, executive director at the markets watchdog, while speaking at an Assocham-organised corporate bond market summit here on Friday.
Municipal bonds are debt instruments like a non-convertible debenture (NCD) or any other debt instrument, issued by municipal corporations with the permission of the respective state governments.
As of March 2024, municipalities across India have collectively raised Rs 1,940 crores from 12 issues and the total outstanding was only Rs 2,184 crore. As against this, the US municipal bonds market is worth $4 trillion.
However, the total outstanding corporate bonds as of now in India are worth Rs 47.29 trillion, while that of Central government bonds are worth Rs 100.7 trillion. There is no cumulative data available on the outstanding amount of state government bonds.
Rao said that Sebi is eager to partner with corporates on sustainable finance, transition and net-zero goals through the bond market route and is also looking forward to discussions with asset management companies and other financial institutions on the issue.
Just like mutual funds, the corporate bonds industry also should take measures to build trust and confidence of retail investors, Rao said, adding issuers of corporate bonds at all rating levels and with appropriate interest rates need to be encouraged.
“A lot of this can actually happen with the private credit fund,” Rao said.
On the online bond platform providers (OBPP) front, Rao said there are 20 OBPPs linked to the BSE and 17 linked to the NSE now.