The Reserve Bank of India has given green signal to foreign portfolio investors to invest in municipal bonds. On Thursday, The Reserve Bank of India said that the measure will “broaden access of non-resident investors to debt instruments in India.”
the municipal bodies that have come to market are well-rated, investors have been cautious because of the lack of transparency around municipal finances in general. A handful of rated municipal bodies in India have issued publicly listed bonds in recent years. It is estimated that about Rs 2,500 crore in such bonds are outstanding.
FPI investments in municipal bonds will be counted as part of the permitted limit for foreign investment in state bonds. The upper limit for FPI investments in state development loans stands at Rs 49,700 crore, but as of date they have only invested close to Rs 2,445 crore, shows data from the Clearing Corporation of India Ltd.