RMC to Issue Municipal Bonds

• 09 Sep 2025

Why in News?

The Ranchi Municipal Corporation (RMC) has been given the go-ahead to raise financial resources through the issuance of municipal bonds under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) 2.0 scheme. 

Key Points

• About: The Joint Secretary-cum-Deputy Director of the Urban Development and Housing Department (SUDA) has directed RMC to take renewed steps toward accessing the municipal bond market, requiring the corporation to:
  • Prepare audited annual accounts up to the financial year 2024–25.
  • Identify a bankable project worth at least ₹125 crore.
  • Appoint both a transaction advisory firm and a credit rating agency to facilitate the process.
  • The PMU (Revenue Augmentation) team will extend technical and procedural support to RMC during this initiative.
• Previous Attempt: RMC had previously explored bond issuance during 2016–17 under the earlier AMRUT scheme. 
  • A credit rating exercise for Jharkhand’s ULBs was conducted, in which Ranchi Municipal Corporation received a BBB rating. Although a transaction advisor was appointed, bonds could not be issued due to the lack of a bankable project at that time.

Municipal Bonds

• Definition: These are debt instruments issued by Urban Local Bodies (ULBs) to fund infrastructure and development projects. 
• Advantages: Reduce reliance on government funds, enhance financial autonomy, attract private investment, and enable long-term urban financing. 
• Challenges: Low issuance due to heavy dependence on state grants. Only a few cities like Pune, Ahmedabad, Surat, Hyderabad, and Lucknow have issued bonds. 
• Funding: The Central Government is actively encouraging urban local bodies (ULBs) across India to mobilize resources through municipal bonds, a globally recognized tool for financing infrastructure. 
  • Under AMRUT 2.0, a provision of ₹520 crore has been allocated as incentives for municipalities that issue such bonds.
• Incentive Structure: The scheme’s incentive framework is aimed at motivating municipalities to raise funds while prioritising investments in sustainable projects, as outlined in the guidelines:
  • First-time issuances: Incentives of up to ₹13 crore per ₹100 crore, capped at ₹26 crore, will be provided.
  • Subsequent issuances: An incentive of ₹10 crore per ₹100 crore will be extended.
  • Green projects: For bonds dedicated to renewable energy or energy efficiency, an additional ₹5 crore per ₹100 crore will be granted.

AMRUT Scheme

• About:
  • AMRUT was launched on 25th June 2015 in 500 selected cities across the country, covering around 60% of the urban population.
  • The mission targets enhancing basic infrastructure and implementing urban reforms for selected cities, encompassing water supply, sewerage, drainage, green spaces, non-motorised transport, and capacity building.
• AMRUT 2.0 Scheme:
  • The scheme was launched on 1st October 2021, subsuming AMRUT 1.0 for the period of 5 years, i.e., from the financial year (FY) 2021-22 to the FY 2025-26.
  • Its objectives are universal coverage of water supply from 500 cities to about 4,900 statutory towns in the country, and coverage of sewerage/septage management in 500 cities covered in the first phase of the AMRUT scheme.
  • AMRUT 2.0 aims to promote the circular economy of water through the development of a City Water Balance Plan (CWBP) by recycling/reuse of treated sewage, rejuvenation of water bodies, and water conservation.