Mumbai: With supportive regulatory framework and the Centre’s financial incentives, more and more municipalities are tapping the bond market, and the current fiscal may see more than a dozen such bodies mopping up Rs 2,000 crore. The supportive regulatory framework and Centre’s financial incentives under Atal mission for rejuvenation and urban transformation have led several municipalities raising debt by way of municipal bonds since 2017.
“The size of such borrowings, though, has remained modest, though. A total of 17 urban local bodies have issued 23 municipal bonds between FY18 and Q2 of FY26, raising a total of Rs 3,359 crore. Six municipalities have already raised Rs 575 crore from April to end-September this year. Another seven to 10 are at various stages of preparation/approval for bond issuances.
“We estimate that this may translate to around Rs 2,000 crore in municipal bond issuance in FY26, marking the highest yearly issuance to date,” Anuradha Basumatari, a director with India Ratings said in a note on Wednesday. Tax and non-tax revenue of municipalities will remain the primary drivers of total revenue, followed closely by assigned revenue and compensation in the near to medium term.
On average, tax and non-tax revenue for these municipal corporations constituted 51.05 percent of the total revenue income during FY20-24, indicating a greater reliance on their own sources and insulating them somewhat from the state’s revenue performance.
The agency expects these municipalities revenue to grow 11.5 percent in aggregate in the medium term. Property tax dominates tax revenue of municipalities contributing around 61 percent to total tax revenue during FY25-27. Collection efficiency for current property tax generally averages around 70 percent for large such bodies.
