Write short notes on the following: Municipal Bonds

Municipal Bonds: Municipal bonds, often referred to as 'muni bonds', are debt instruments issued by local government bodies or entities to raise funds for public projects and infrastructure development. In India, SEBI issued regulations in 2015 for urban local bodies to raise funds by issuing municipal bonds, aiming to revive this segment of the debt market. Issuing Entities: As per SEBI regulations, municipal bonds can be issued by any: Municipality. Statutory Body or Board or Corporation. Authority, Trust or Agency established or notified by any Central or State Act. Special Purpose Vehicle notified by the State Government or Central Government. These entities must undertake one or more functions that may be entrusted under Article 243W of the Constitution of India (which deals with the powers, authority, and responsibilities of Municipalities). A municipality itself is an institution of self-government constituted under Article 243Q of the Constitution of India. Purpose: Municipal bonds are issued to finance various public projects such as: Infrastructure development (e.g., roads, bridges, water supply, sanitation). Urban development projects. Social infrastructure (e.g., schools, hospitals). Other public utility services. Eligibility Criteria (as per SEBI for Indian Municipalities): The issuer must not have a negative net worth in each of the three previous years. The issuer must have no default in the repayment of debt securities and loans availed from banks or non-banking financial companies in the last year. The issuer, promoter, and directors must not be named in the list of wilful defaulters. Municipal bonds offer investors a way to invest in local development projects, often with tax benefits, while providing local bodies with an alternative source of funding.