What is Municipal Bond?
As the name suggests Municipal bonds are related to the city’s civic body and the idea behind the introduction of these bonds is to raise funds that can be used by the Municipal Corporations to develop roads, schools, airports and seaports along with carrying out the infrastructure-related work.
Overview: India and International Countries
The concept of Municipal Bonds is new in India but some cities have started working on this idea as they face a financial crisis. The latest study shows that the United States is the biggest municipal bond market across the world with $3.8 trillion bonds outstanding for issuance.
While coming back to India, you must know that the Uttar Pradesh State Government has given nod to the Lucknow and Ghaziabad Municipal Corporations for raising funds via Municipal bonds. However, this is not the first time that such approval is given by the Government. Prior to this, the Pune Municipal Corporation in 2017 and Greater Hyderabad Municipal Corporation in 2018 have passed such orders.
Reasons to Invest in Municipal Bonds:
- Under this investment, the City Municipal Corporation will pay the principal amount as well as the interest amount to the investor once the bonds mature. This monetary investment is a good option as you get double benefit. Firstly, the availability of infrastructural amenities like better roads, educational establishments, hospitals and banks will elevate the standard of living. Secondly, you will get a handsome amount of money at the time of maturity i.e. either five or seven years.
- Another reason to invest Municipal Bonds is contribution towards building a smart city. The easy availability of clean drinking water, sanitation, drainage, smart transportation, rainwater harvesting, garbage collection system, better roads and street lighting are possible to experience as the civic body raise funds for all these works via Municipal bonds.
- The last reason to invest in Municipal bonds is to escalate the current amenities to the next level. The upgradation of presently available facilities is possible only if the civic bodies fill the fund gap by introducing Municipal bonds.
The gradual acceptance of this idea is paving way for a better future to live in the country. Hence, more such approvals will prove helpful in building new India.