BENGALURU: With credit rating documentation completed, five city corporations under GBA are preparing major projects to be undertaken using municipal bonds. The five corporations are expected to get their credit ratings before the end of this month, post which they need to announce the project and generate the required funds by issuing municipal bonds.
To incentivise municipalities and develop urban areas, Finance Minister Nirmala Sitharaman had announced in the Union Budget that an incentive of Rs 100 crore would be provided for a single bond issue of more than Rs 1,000 crore.
Even Chief Minister Siddaramaiah, while presenting the budget, asked the five corporations to mobilise resources for development works by issuing ‘Municipal Bonds’ based on their balance sheets. Each of the five corporations, in their maiden budgets in March, announced plans to issue municipal bonds worth Rs 200 crore.
“Earlier, we had BBMP, which was dissolved to form Greater Bengaluru Authority with five new city corporations. To issue municipal bonds, each corporation must have a credit rating, which, in simple terms, is an assessment of the borrower’s creditworthiness. We have completed documentation work for the same,” said GBA Special Commissioner (Finance) Harish Kumar.
He said there was a lot of preliminary work involved in applying for a credit rating. “All five corporations had to submit their assets and revenue to calculate their financial health. A presentation was given to SEBI (Securities and Exchange Board of India) along with the necessary documents,” he explained.
Bengaluru was the first city in the country to issue a municipal bond in 1997 through the then Bangalore Municipal Corporation, raising Rs 125 crore. With the city split into five corporations, the need for funds to take up infrastructure works has only increased, and municipal bonds are seen as a way to generate money to fund big-ticket projects.
For every Rs 100 crore generated through municipal bonds, city corporations have been told they will get an incentive of Rs 13 crore from the Union government.
Harish Kumar said credit ratings are expected in 15 days and the five corporations are preparing major infrastructure projects.
