Sebi issues new rules for issuance & listing of municipal bonds

By: | Published: December 31, 2014 2:26 AM

The Securities and Exchanges Board of India (Sebi) has issued a concept paper on proposed framework for issuance...

The Securities and Exchanges Board of India (Sebi) has issued a concept paper on proposed framework for issuance and listing of debt securities by municipalities, according to a press release.

“Pursuant to the recommendation made by Corporate Bonds and Securitization Advisory Committee (CoBoSAC), SEBI is proposing to lay down regulatory framework for issue and listing of debt securities by municipalities,” the release said.

CoBoSAC had earlier recommended some requirements for municipalities to issue debt securities which stated that the municipal bonds should have a minimum maturity of three years. It also recommended that issuers have option to offer deep discount bonds or other financial innovations especially to enhance the tenor of the bond. “It will be mandatory for the issuer to obtain rating from a credit rating agency registered with Sebi before the issuance of municipal bonds, as per the recommendations.

According to the concept paper , the Bangalore Municipal Corporation was the first to issue a municipal bond of R125 crore with a state guarantee in 1997. It added that access to capital market commenced in January 1998, when the Ahmedabad Municipal Corporation (AMC) issued the first municipal bonds in the country without any state government guarantee for financing infrastructure projects in the city. AMC had raised R100 crore by the said public issue and it was followed by more issues via private placement, it said.

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