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Urban local bodies in Telangana to issue pooled municipal bonds

The GHMC, for the first time, had issued bonds in 2018 and raised about Rs.495 crore for executing different works.

By Telangana Today

Updated On - 15 April 2024, 08:07 PM

Urban local bodies in Telangana to issue pooled municipal bonds — Commissioner and Director Municipal Administration D Divya

Hyderabad: After the Greater Hyderabad Municipal Corporation (GHMC), another 14 Urban Local Bodies (ULB) in the State are likely to issue pooled municipal bonds to raise funds for taking up different development works, especially those related to infrastructure.

The GHMC, for the first time, had issued bonds in 2018 and raised about Rs.495 crore for executing different works. Buoyed with the success of GHMC, 14 ULBs in the State are now likely to follow suit and raise funds in similar fashion.

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The Commissioner and Director Municipal Administration (CDMA) has invited qualified and experienced credit rating agencies to submit proposals for rating the Pooled Finance Development Fund (PFDF) bonds issue. The PFDF bonds issue is to finance crucial urban infrastructure projects in the ULBs participating in the pooled municipal bonds.

Though a few larger municipalities focused on building their capacity, most lack the capacity for sustained long-term planning. Further, the projects size for smaller municipalities has also not been adequate to constitute a marketable size for bond issues. This apart, they also lack internal systems for accessing market borrowings.

To help ULBs overcome capital issues, the union government launched the PFDF scheme. This is meant for providing credit enhancement grants to a pool of medium and smaller municipalities to access the capital market through pooled finance municipal bonds. To utilize this option, the CDMA invited agencies for rating the ULBs with detailed Structured Payment Mechanism, developing the rating rationale and other aspects.One agency has filed its bid and senior authorities have to take a call.

Generally, it takes over a month for the agencies to complete the task of rating the ULBs based on their performance in different parameters, including financial and others, said a senior official from municipal department.

ULBs participating in the pooled municipal bonds