RBI allows foreign investors to buy municipal bonds

The Reserve Bank of India has allowed foreign portfolio investors (FPIs) to invest in municipal bonds issued by various urban local bodies. This will broaden the access of non-resident investors to debt instruments in the country. The limits for investing in these municipal bonds are to be set within the limits for FPI investments in state development loans (SDLs). The limits set for SDLs amount to 2 per cent of outstanding securities. The measure will help municipal bodies in improving their performance and financial management. Many municipal corporations such as the Ahmedabad Municipal Corporation and the Pune Municipal Corporation have issued publicly listed bonds.