What is a municipal bond?
A municipal bond is a kind of debt instrument where investors offer loans to local governments. They are issued by civic bodies for specific projects and usually have a 10-year tenure. The ULB pays the annual interest on the bonds to the investor at the decided rate. The difference between a bank loan and a municipal bond is that any institution can secure a bond only if it has favourable credit ratings. The bond helps raise funds from the stock market. The bond also increases the number of investors available to the civic body, as compared to a loan from a single bank.
Cash-strapped VMC to float bonds to raise funds for projects
In its the budget for 2019-20 financial year (FY), the VMC General Board had given in-principal approval for mobilisation of Rs 100 crore through issuance of Municipal Bond under AMRUT scheme, which was raised to Rs 200 crore in the FY 2020-21. Updated: December 10, 2020 5:03:39 am
The VMC had appointed India Rating and Research (Fitch) Ltd and CRISIL Ltd for the credit rating. While Fitch assigned AA+/Stable, CRISIL ratings for VMC are AA/Stable. (Representational)
THE VADODARA Municipal Corporation (VMC) will issue bonds to raise money to fund development works sanctioned under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), in the city by January 2021, officials said.