Only 223 urban local bodies have ratings, limiting access to municipal credit
Only 223 of India's 4,332 urban local bodies have credit ratings, blocking access to a ₹5.8 trillion financing opportunity even as cities face an ₹11.5 trillion capex need through FY31.
India's 4,332 urban local bodies (ULBs) only have credit-rating reports for 223 of them, leaving the majority without access to market-based financing, despite an estimated ₹5.8 trillion in credit opportunity. The issue was discussed at the Public Sector Banks (PSB) Conclave 2026, attended by Union finance minister Nirmala Sitharaman.
India's urban population is projected to reach 53% of the total by FY2047, with cities set to generate nearly 70% of GDP by then. However, 70% of the needed urban infrastructure, including housing, metro rail, roads, water supply, waste management, and logistics, remains to be built. To bridge the gap, the framework suggests public financial institutions (PFIs) should play a larger role in helping municipalities become more creditworthy by linking credit access to improvements in tax collection, user charges, and revenue modernization.
NaBFID may provide partial credit enhancement for eligible municipal projects, improving their credit profile and facilitating access to financing. However, municipalities face challenges such as weak financial management, poor bookkeeping, and a small municipal bond market that stands at just 0.06% of India's corporate bond market.
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