RBI allows Foreign Portfolio Investors to Invest in Municipal Bonds

In a move to boost funding of municipal corporation-run projects in India, the Reserve Bank of India (RBI) has allowed Foreign Portfolio Investors (FPI) to invest in municipal bonds.

The Foreign Portfolio Investors investment in municipal bonds would be calculated within the limits set for FPI investment in State Development Loans, according to India’s central bank.

However, all other conditions under the SEBI (Issue and listing of Debt Securities by Municipalities) Regulations, 2015, regarding the investment by FPIs in the debt market will remain the same.

The move is seen as a major boost for the development of 100 Smart Cities in India under the ambitious ‘Smart Cities Mission‘. According to experts, all Smart Cities have undergone credit rating and many are in the advanced stage of issuing bonds and implementing VCF tools.

Earlier, Pune became the firt city to raise Rs 200 crores through a municipal bond in 2017. Hyderabad and Ahmedabad Municipal Corporation also raised funds by selling municipal bonds in 2018 and 2019, respectively.

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