Published on: January 28, 2023

Municipal bonds

Municipal bonds

Why in news?  Markets regulator SEBI has launched an information database on municipal bonds as part of efforts to develop the bond markets, an outreach programme on municipal bonds and municipal finance


  • The database contains a wide range of information in the form of statistics and regulations, circulars, guidance note and Frequently Asked Questions issued by SEBI in respect of municipal debt securities,

About Municipal bonds

  • This bonds refers to a type of debt security issued by local, county, and state governments and regulated by SEBI
  • They are commonly offered to pay for capital expenditures, including the construction of highways, bridges, or schools.
  • Municipal bonds act like loans, with bondholders becoming creditors.
  • Short-term bonds mature in one to three years, while long-term bonds won’t mature for more than a decade.
  • Generally the interest on municipal bonds is exempt from income tax

The two most common types of municipal bonds are the following:

  • General obligation bonds: They are issued by states, cities or counties and not secured by any assets.
  • Revenue bonds : They are not backed by government’s taxing power but by revenues from a specific project or source, such as highway tolls or lease fees. If the revenue stream dries up, the bondholders do not have a claim on the underlying revenue source.