GHMC to raise funds via bank term loans

The municipal corporation had raised Rs. 495 crore through municipal bonds in three tranches for taking up the Strategic Road Development Programme (SRDP).

By Author  |  Published: 18th Oct 2019  12:56 am

HYDERABAD: Stung by criticism over the battered roads, the Greater Hyderabad Municipal Corporation (GHMC) is looking at ways to mop up funds to help it take up repair and development works in the city.

The civic body’s move to issue municipal bonds was a huge success, but with funds raised thus having restrictions on utilization, the GHMC is now preparing to raise money through bank term loans for expediting different ongoing development works and to complete land acquisition works here.

The municipal corporation had raised Rs.495 crore through municipal bonds in three tranches for taking up the Strategic Road Development Programme (SRDP). However, these funds are to be utilized for specified projects and works, while term loans offer the flexibility of utilizing the funds for different projects. With the bank lending rates being reduced considerably in the market as well, the municipal corporation believes term loans are the right option.

In 2017, the State government had accorded permission to the municipal corporation to raise Rs.1,000 crore through issue of municipal bonds and Rs.2,500 crore through term loans.

Repayment capacity

Generally, banks and financial institutions check the loan repayment capacity of the municipal corporation. This apart, credit ratings and the financial stability based on the projected rise in income and expenditure of the municipal corporation are also examined thoroughly. With GHMC already issuing municipal bonds thrice, all the required documents, credit ratings and other required eligibilities are readily available for the banks to check the financial performance.

Currently, the market is not conducive for issuing bonds as the coupon rates are increasing steadily compared to last year. This apart, the lending rates of banks are being reduced considerably and at this stage, raising funds through term loans is sensible. Hence this option was being explored, a senior GHMC official said.

The idea is also to raise funds as per requirement to avoid interests on loans. Though the government has accorded permission for Rs.2,500 crore, the funds will be raised in instalments as and when required. Besides aiding in easy repayment, this will enable the municipal corporation to avoid interests, he said.

“At present, we are finalizing the modalities on the process to raise funds and discuss with a few bank managements. After a formal approval from the government, the loans will be taken in a month,” the official said.

 


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