Weak balance sheets challenge municipal bond issuance, SEBI Chairperson Tuhin Kanta Pandey said on Thursday (September 18, 2025). Speaking at the Annual Infrastructure Conclave of NaBFID in Mumbai, he highlighted both the potential and hurdles of municipal bonds in India.
Pandey explained that municipal bonds have been an important tool for financing city-level development worldwide. They allow urban local bodies to raise long-term funds for projects such as sanitation, transport, waste management, and water supply. However, in India, weak balance sheets and delayed clearances have slowed the growth of this market.
He noted that credibility remains a key concern for investors. Many local bodies lack financial discipline, which discourages participation in the bond market. Weak balance sheets challenge municipal bond issuance because investors demand transparency and assurance before committing funds.
The SEBI Chairperson also spoke about solutions. He said asset monetisation, along with the development of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), could open new financing avenues. Stronger governance and improved project readiness will further strengthen investor confidence.
Pandey stressed that reforms in municipal finance are essential for sustainable infrastructure growth. By building credibility and ensuring accountability, local bodies can access larger pools of capital. He pointed out that successful examples of municipal bonds in cities like Pune and Ahmedabad show what is possible with the right systems in place.
As India pushes forward with rapid urbanisation, strengthening the municipal bond market will be vital. Pandey concluded that municipal bodies, regulators, and governments must work together to create a credible, transparent, and investor-friendly framework.
