Empowering urban local bodies in India to take up development responsibilities by using financial intermediaries to tap capital markets has serious implications for the pattern of urban development and organisation of space within cities. The policy of liberating the local bodies from government regulatory and legislative controls may oblige the former to come under the direct or indirect control of corporate and financial institutions, resulting in dilution of their social commitments. It is important to keep watch on the process by which cities are segmented and basic amenities are denied to the poor because of this growing dependence on private resources for infrastructural investment.