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31st March 2025 (31 Topics)

Municipal Bonds

Context

The National Stock Exchange (NSE) has launched a dedicated website for municipal bonds to boost transparency, investor awareness, and accessibility in this emerging asset class. 

About the Website

  • The website serves as a one-stop platform for investors, policymakers, and market participants to access:
    • Municipal bond issuances – List of bonds issued by local governments.
    • Credit ratings – Helps investors assess bond safety.
    • Trading volumes & yields – Tracks bond performance and liquidity.
    • Nifty India Municipal Bond Index – Measures the overall performance of municipal bonds in India.
    • Market insights & regulations – Offers reports, guidelines, and real-time data.
  • This initiative bridges the information gap in India's municipal bond market, encouraging both institutional and retail participation.

Municipal Bonds in India

  • Municipal bonds are debt instruments issued by Urban Local Bodies (ULBs) to finance urban infrastructure and development projects, such as roads, water supply, sanitation, and smart cities.
  • Despite their importance in city financing, municipal bonds have not gained much popularity in India due to factors like lack of awareness, limited investor participation, and regulatory challenges.
  • They are governed by SEBI guidelines and issued by financially strong ULBs.

What are Bonds?

  • A bond is a fixed-income instrument where investors lend money to an issuer (government, corporations, or municipalities) in exchange for regular interest payments and principal repayment at maturity.
  • Types of Bonds:
    • Treasury Bonds – Issued by the government; low risk.
    • Municipal Bonds – Issued by city/local governments.
    • Corporate Bonds – Issued by companies to raise funds.
    • Floating Rate Bonds – Interest rate changes over time.
    • Zero-Coupon Bonds – No periodic interest, only principal at maturity.
    • Convertible Bonds – Can be converted into equity shares.
    • Inflation-Protected Bonds – Adjusted for inflation.

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