Bengaluru to revive municipal bonds, targets Rs 1k-cr push to fund city infrastructure

Bengaluru: The Greater Bengaluru Authority (GBA) is preparing to revive municipal bonds as a financing tool for city infrastructure, with plans to mobilise about Rs 1,000 crore in the initial phase.Bengaluru also has historical precedent in this area. The erstwhile Bangalore Municipal Corporation (BMC) was among the first urban bodies in India to issue municipal bonds in 1997. Officials say the renewed push is intended to revive that model while aligning the city with broader reforms in urban finance.
Confirming the plan, additional chief secretary, UDD, Tushar Giri Nath told TOI that GBA was working towards preparing Bengaluru's five city corporations to access financial markets. "The initial aim is to raise Rs 1,000 crore through the municipal bonds. The initiative is aimed not only at raising funds but also at improving the financial systems and transparency of municipalities. Before issuing bonds, civic bodies must undergo credit rating assessments and document their assets, revenue streams, and financial health," Nath said.The basic plan to leverage the instrument found a mention in the Karnataka State Budget 2026–27, where chief minister Siddaramaiah announced that corporations under the GBA framework would mobilise resources for development works by issuing municipal bonds based on their balance sheets.Officials have confirmed to TOI that under the plan, each of the five corporations is expected to raise roughly Rs 200 crore, taking the combined amount to about Rs 1,000 crore in the first phase. They said the process requires municipalities to undergo a formal credit rating exercise before bonds can be issued. "Municipal bonds require the ranking of the municipality. We will have to put our assets and revenue streams up for assessment. Once we get a proper credit rating, we can float bonds and expect a better response from investors," Nath said.To prepare for the bond issuance, the state govt is working with intermediaries and financial institutions, including the Housing and Urban Development Corporation (Hudco), to compile documentation and establish the required financial processes.Authorities stressed that the broader goal is to make municipal corporations financially credible institutions that can access multiple funding sources. "The amount itself is not a big issue. The idea is to ensure municipalities are in a position where they can access funds through formal financial markets," Nath said.Municipal bonds are widely considered a viable funding mechanism for urban local bodies because they generally carry lower interest burdens compared with conventional bank loans and reduce dependence on govt grants.Credit rating agencies will evaluate the financial capacity of the corporations, including their revenue generation and debt repayment ability. Once the documentation and rating process are completed, authorities plan to move forward with the bond issuance, with operational details expected to be finalised in consultation with civic officials in the coming months.