The government of Uttar Pradesh is reportedly encouraging its urban centres to fund their developmental and infrastructure projects. The Lucknow Municipal Corporation (LMC) has planned to float municipal bonds worth Rs 1 billion for a multi-storied housing project. A municipal bond is debt security issued by a municipality to finance capital expenditure. It fetches the investor payments on a predetermined rate of interest over a stipulated time period.
The corporation is expected to table the proposal for approval before the Cabinet of elected mayors. Currently, retail investors are not allowed to invest in municipal bonds, besides most mutual funds have also been shy of these bonds, since these instruments are still new in the capital market. If successful in issuing these bonds, LMC will be the the first municipality in entire North India, barring New Delhi Municipal Corporation (NDMC), to achieve the feat.
Currently, the LMC annual budget is to the tune of over Rs 2,200 crore, with liabilities of about Rs 250 core, especially salaries and outstanding payments.