Ahmedabad Municipal Corporation Plans To Issue The Biggest Municipal Bond Of ₹1,000 Crore

Gujarat's Ahmedabad Municipal Corporation (AMC) plans to be the first civic corporation issuing the biggest municipal bond amounting to ₹1,000 crore during the fiscal year 2026-27, beating out Indore Municipal Corporation's earlier record of ₹244 crore issued in the early months of 2023.

The move becomes more important after the Union Budget announcement. The government has offered a ₹100 crore incentive to municipal bodies that raise ₹1,000 crore via bonds. This support can bring down borrowing costs by around 1–1.5 percentage points.

Issuances Of Municipal Bonds Till Date

The Ahmedabad Municipal Corporation (AMC) issued its bonds in several instalments since 1998 and in 2002, 2004, and 2005.

The proceeds from the latest issue will be utilised for constructing public utilities such as roads, water supply system, and sewerage networks.

Talking about the nation as a whole, the municipal bond market in India is very much developing, with outstanding bonds worth up to ₹4,340 crore.

Apart from this, Bengaluru Municipal Corporation issued the first municipal bond in India in 1997, whereas Indore Municipal Corporation issued the first bond listed on the National Stock Exchange (NSE) in 2018.

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Returns And Risks On Municipal Bonds

Municipal bonds can offer returns typically higher than fixed deposits. They can also provide some liquidity, as investors may exit before maturity, though market depth can vary.

Generally, municipal bonds are seen as fairly safe. They often come with multiple layers of credit support. But the risk still exists. If a municipal body’s income falls because of tax delays or lower government grants, repayment pressure can rise. That can hurt timely payments and may even lead to a credit rating downgrade.

It is also important to state that many audits conducted by the Comptroller and Auditor General (CAG) have revealed that financial mismanagement is rampant amongst Indian municipalities, with most running in budget deficits and without steady sources of revenue.

Sources:

The Economic Times

Moneycontrol

Amdavad Municipal Corporation