Now Reading: Only 223 of 4,332 urban local bodies have credit ratings
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Only 223 of 4,332 urban local bodies have credit ratings
India's cities face an Rs 11.5 lakh crore capital expenditure requirement between FY27 and FY31, but only 223 of the country's 4,332 urban local bodies (ULBs) currently have credit ratings, locking most…
India's cities face an Rs 11.5 lakh crore capital expenditure requirement between FY27 and FY31, but only 223 of the country's 4,332 urban local bodies (ULBs) currently have credit ratings, locking most municipalities out of market-based financing. An indicative Rs 5.8 lakh crore credit opportunity exists over the same period, according to discussions at the Public Sector Banks Conclave 2026, where Union finance minister Nirmala Sitharaman was present.
The National Bank for Financing Infrastructure and Development (NaBFID) has proposed offering partial credit enhancement for eligible municipal projects to improve their credit profiles and bankability. The municipal bond market remains tiny at roughly Rs 6,000-6,100 crore, equivalent to just 0.06% of India's corporate bond market, compared with 7% in the US. Most recent bond issuances have carried investment-grade ratings of AA or AA+, with maturities of five to 10 years and coupons between 7.6% and 8.5%.
Government schemes such as the Urban Challenge Fund are meant to push municipal corporations toward better financial discipline. Around 70% of urban infrastructure needed to support India's projected 53% urban population by FY2047 is yet to be built.
Indian Opinion Analysis
India's urban local bodies face a classic chicken-and-egg problem: they cannot borrow without ratings, but they cannot afford the financial systems that ratings require. Roughly half of ULB revenue comes from taxes and fees, the rest from state grants, leaving most municipalities fiscally dependent and unable to fund basic services, let alone mega projects. The Rs 11.5 lakh crore gap is nearly four times the total spending on the Jal Jeevan Mission. The key number to watch is how many ULBs get rated under the proposed standardised framework, if even 500 of 4,332 get rated in the next two years, that would unlock meaningful municipal bond issuance. The next PSB Conclave or a formal government circular on NaBFID's partial credit enhancement will signal real action.
Source: livemint.com
This story was synthesised by AI from the source linked above.
