India's markets regulator has proposed a number of changes to municipal bonds, according to a proposal paper on the regulator's website posted on Wednesday, in a bid to boost their popularity.
Among the key changes, the Securities and Exchange Board of India (SEBI) has proposed that these bonds can be issued for refinancing. It has also specified a minimum face value for the debt and incentives for certain categories of investors.
Municipal bonds are issued by local bodies as a way to fund public projects involving roads, water supply and sanitation. India has tried to popularise municipal bonds, common elsewhere in the world, for years, but governance issues have curbed investor interest.
Over 20 Indian cities have raised around 45 billion rupees ($470.67 million) over the last nine years through bonds, according to regulatory data.
Earlier this year, SEBI allowed bond issuers to give additional incentives to senior citizens, women investors and retail investors, and proposed that municipal bond issuers could also provide incentives to these sets of investors.
Incentives can be through additional interest or discounts on issue price, SEBI said.
It has proposed a minimum face value of either 10,000 rupees or 100,000 rupees for these bonds, and added that the trading lot of the listed municipal debt security will always be equal to the face value of such security.
In February, India's Finance Minister Nirmala Sitharaman also announced an incentive of 1 billion rupees for municipal corporations issuing bonds worth at least 10 billion rupees.
