NSE Indices unveils municipal bond index

Subject : Economy

Sections : Msc

Concept :

NSE Indices Ltd., an arm of the National Stock Exchange of India (NSE), had introduced the country’s first municipal bond index.
The new Nifty India Municipal Bond Index will track the performance of municipal bonds issued by Indian municipal corporations across maturities and having investment grade credit rating.
Currently, the index has 28 municipal bonds issued by 10 issuers, all having AA credit ratings. The index constituents are assigned weights based on the outstanding amounts.
Raising money from capital markets incentivises municipal corporations to fund new projects and improve civic infrastructure while encouraging them to become financially disciplined and governance oriented.
The index is computed using the total return methodology including price return and coupon return. The index has a base date of January 1, 2021, and a base value of 1,000. The index will be reviewed quarterly.

Municipal Bond Market

The Indian municipal bond market has seen an upturn in issuances after SEBI’s Issue and Listing of Municipal Debt Securities Regulations, 2015 was implemented and it led to an improved emphasis on municipal finance by policymakers.
Raising money from capital markets stimulates municipal corporations to fund new projects as well as further enhance civic infrastructure while encouraging them to become financially disciplined and governance oriented.

Union Budget 2023

In the Union Budget session 2023, the government mentioned that it will be granting incentives to urban civic bodies for the improvement of their finances and creditworthiness.
Around 9 municipal bodies raised Rs 38.40 billion through bonds in the years 2016-17 and 2020-21, as stated in the report of the Reserve Bank of India.

For notes on municipal bonds, refer – https://optimizeias.com/municipal-bonds/