NEW DELHI: To help the government's 'Smart Cities' programme, SEBI today approved a new set of norms for listing and trading of municipal bonds on stock exchanges, while channelising household investments for urban infrastructure development.
After approving the regulations for such municipal bonds, also known as 'muni bonds', Sebi Chairman U K Sinha said this would allow authorities to raise funds including for setting up of smart cities, by raising funds from the public and from the institutional investors.
These municipal authorities would need to have a strong financial track record and such bonds would be listed on the stock exchanges, Sinha said after a meeting of Sebi's board that earlier was addressed by Finance Minister Arun Jaitley.
The new norms would come with adequate safeguards and would provide for disclosure requirements to be made by the prospective issuers.
Talking to reporters after its board meeting, Sinha said the various safeguards to protect the interest of investors, putting their money in municipal bonds, include the need for having investment grade credit rating.
Besides there would be a monitoring agency -- which would be banks or financial institutions -- to keep a tab on the performance of these securities in the market.
The issuer's contribution for each project should be at least 20 per cent of the project costs, which would be from their internal resources or grants.
The bonds would need to have a minimum tenure of three years and the issuers should not have defaulted on their repayment obligations in the last one year.
Noting that the decision also takes into account the government's plan of setting up 100 smart cities, Sinha said the issuance of municipal bonds would be based on a "project-oriented approach".
These norms are also in line with the government's guidelines for issue of tax-free bonds by municipalities.