Budget 2023: Municipal bond incentives for civic bodies that improve finances

The government will also set up an Urban Infrastructure Development Fund (UIDF), which will be managed by the National Housing Bank and can be used by public agencies to create urban infrastructure in tier-II and tier-III cities, Sitharaman said.

India's government will provide incentives to urban civic bodies to improve their finances and credit worthiness and help them raise funds through municipal bonds, its finance minister said on Wednesday.

The government is expected to make available 100 billion Indian rupees ($1.22 billion) for setting up UIDF, the FM said. (PTI)

"Through property tax governance reforms and ring-fencing user charges on urban infrastructure, cities will be given incentives to improve their credit worthiness for municipal bonds," Finance Minister Nirmala Sitharaman said while announcing the federal budget for 2023/24.

The government will also set up an Urban Infrastructure Development Fund (UIDF), which will be managed by the National Housing Bank and can be used by public agencies to create urban infrastructure in tier-II and tier-III cities, Sitharaman said.

The government is expected to make available 100 billion Indian rupees ($1.22 billion) for setting up UIDF, she said.

Between 2016-17 and 2020-21, nine municipal bodies raised around 38.40 billion rupees through bonds, the Reserve Bank of India (RBI) said in its report on municipal finances in November.

In January, Reuters reported that an Indian local government body - Pimpri Chinchwad Municipal Corp (PCMC) - is planning to raise 2 billion Indian rupees through municipal bonds and is likely to tap the market by March.

Indore Municipal Corp is also planning to raise 2.44 billion rupees through a public issue of green bonds, likely to launch by March, bankers said.