The decision to raise funds through bonds from the public and private sectors stems from the view that the increasing development needs of local bodies cannot be met solely through government allocations or their own revenues.
Thiruvananthapuram, Kerala: For municipalities and panchayats to issue ‘municipal bonds’ for large development projects, the financial health of local bodies is crucial.
The decision to raise funds through bonds from the public and private sectors stems from the view that the increasing development needs of local bodies cannot be met solely through government allocations or their own revenues. However, grading each local body based on assets, liabilities, and repayment capacity is essential.
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The Kerala Urban Policy Commission (KUPC), formed in December 2023, recommended issuing municipal bonds to fund infrastructure development. Based on this, the budget announced that municipalities and corporations would be allowed to issue bonds for projects that are both socially beneficial and revenue-generating, including panchayats. To implement this, amendments will be made to the Loan Act.
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A consultant will conduct a detailed assessment of financial liabilities. Guidelines on the amount of the loan and its purpose will be prepared by the LSG Department.
The government has also decided to provide additional state grants to local bodies that increase their own revenue and to empower them through the use of Corporate Social Responsibility (CSR) funds via a Finance Board. Currently, local bodies are lagging in utilising CSR funds. The Finance Board will address this.
Published: 31 Jan 2026, 07:31 am IST
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