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The Securities and Exchange Board of India (SEBI) has proposed allowing municipal bodies to refinance existing debt through bond issuances, use part of the proceeds for project-linked working capital, and revise the framework for pooled municipal bond fundraising, as part of a review of the municipal debt securities framework. The proposals form part of a consultation paper seeking amendments to the SEBI (Issue and Listing of Municipal Debt Securities) Regulations, 2015. SEBI has proposed expressly permitting municipal bodies to raise funds through bond issuances to refinance existing loans or debt. Issuers would have to disclose details of the debt being refinanced. These would include the type of existing loan, lender details, interest rate, repayment schedule, purpose of the original borrowing, and any past restructuring. The regulator has also proposed allowing up to 25% of issue proceeds to be used towards working capital requirements directly linked to the project being financed. However, the funds cannot be used for general purposes. SEBI has also proposed a revised framework for pooled municipal bond issuances involving two or more municipalities through a pooled finance vehicle or special purpose vehicle (SPV). The existing regulations already permit such structures. However, the consultation paper proposes additional disclosure and operational safeguards. The constituent municipalities would have to enter into an agreement with the pooled finance SPV. SEBI has proposed aligning municipal debt rules with provisions under the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021. The proposals include prescribing face value and trading lot norms for municipal debt securities issued on a private placement basis. SEBI has also proposed permitting incentives such as additional interest or issue price discounts for specified investor categories. SEBI has also proposed permitting incentives such as additional interest or issue price discounts for specified investor categories. Separately, it has proposed aligning municipal debt rules with the non-convertible securities framework by allowing electronic advertisements for public issues, enabling ESG debt issuances by municipalities, and adopting a uniform definition of “working day.” Powered by Capital Market - Live News
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