News Highlight
Securities and Exchange Board of India (SEBI) launches information database on municipal bonds.
Key Takeaway
- Markets regulator SEBI has launched an information database on municipal bonds.
- SEBI organised an outreach programme on municipal bonds and municipal finance in the national capital as part of its efforts to promote the bond markets.
- Participants in the training included representatives from the Ministry of Housing and Urban Affairs, municipal corporations, stock exchanges, credit rating agencies, merchant bankers, and debenture trustees.
Securities and Exchange Board of India (SEBI)
- About
- SEBI is a statutory body established on April 12, 1992, in compliance with the terms of the Securities and Exchange Board of India Act, 1992.
- Aim
- To protect the interests of securities investors and to support the development and regulation of the securities market.
- It is the government-owned regulator of India’s securities and commodity markets.
- Powers and Functions
- It is a quasi-legislative and quasi-judicial body with authority to write regulations, conduct investigations, issue judgements, and inflict penalties.
- To safeguard Indian investors’ interests in the securities industry.
- To encourage the growth and smooth operation of the securities market.
- To govern the functioning of the securities market.
- Portfolio managers, bankers, stockbrokers, investment advisers, merchant bankers, registrars, share transfer agents, and others will use it as a platform.
- To govern the activities of depositors, credit rating agencies, securities custodians, foreign portfolio investors, and other participants.
- To educate investors about the securities markets and the intermediaries who serve them.
The Information Database
- About
- The information database offers a diverse set of data in the form of statistics and rules, circulars, and advisory notes.
- Furthermore, Sebi provided commonly asked questions regarding municipal debt securities.
- The repository includes a variety of checklists for pre-listing criteria as well as sample letters.
- In addition, an issuer planning to enter the municipal bond market must obtain certificates from various intermediaries.
Municipal Bonds
- Overview
- They are also called “muni bonds” or “muni.”
- It is a debt security issued by local governments to support capital expenditures such as highway building, bridge repair, and school construction.
- They are generally exempt from taxes.
- Unlike state development bonds, these bonds are not backed by a sovereign guarantee.
- A municipal corporation raises funds from individuals or institutions through muni bonds.
- Furthermore, it pledges to pay a certain amount of interest and refund the principal amount on a specific maturity date.
- Significance
- Municipal Bonds can assist Urban Local Bodies (ULBs) in raising funds to execute budgeted initiatives because property tax is the only primary source of municipal revenue.
- Municipal bond market expansion is vital for India’s large cities and municipalities to update their ageing infrastructure.
- Municipalities’ ability to self-sufficiency is also essential to the success of the Centre’s pet programmes such as Smart Cities and Amrut.
Conclusion
- Continuous monitoring and enhanced market intelligence can aid in increasing enforcement.
- This demands a large talent pool.
- India’s financial markets are still divided. When a regulator’s obligations for a financial product overlap, one cannot be held liable for the failure of another.
- A unitary financial regulator makes perfect sense in this framework because it eliminates overlap and banned regions.
Pic Courtesy: AJSH
Content Source: Economic Times