A quiet financial transformation is reshaping urban India
The urban local bodies of India are entering a decisive time-one in which their financial frameworks will decide whether Indian cities can merely cope with the growth a strongly shaped India’s future. As the Prime Minister Narendra Modi has stated on several occasions, the growth story of India in the 21st century will be written by our cities, their governance and the ease of living they bring to the citizens. This is not a rhetoric. It is a reminder that India’s urban shift is irreversible and the institutions that govern cities must now watch the scale of their responsibilities.
For far too long, the cities have been dependent on a year-to-year grants from higher tiers of the government. This approach has left long-gestation infrastructure projects vulnerable to the fiscal volatility. However, a meaningful transition is underway in the form of municipal bonds. Once peripheral in India’s public finance imagination, the municipal bonds are emerging as a credible pathway for city governments to plan, invest and govern like long term institutions. The recent listing of the Nashik Municipal Corporation’s NMC Clean Godavari Bonds 2025 on the national Stock Exchange is not merely an event but one positive indicator of the new financial discipline taking root in India’s urban ecosystem.
The appeal of municipal bonds extends beyond the capital the mobilise. The very necessities for the issuance of municipal bonds impose a governance discipline that urban local bodies have long needed. A city seeking to raise capital through markets must showcase sound accounting practices, predictable flows of cash, ring-fenced revenues, transparent audits and strong project formulation. Each bond is therefore a governance certification as much as a financial instrument. The issuance by Nashik is focused on reuniting the river Godavari, depicting that urban India is beginning to synergise environmental responsibility with capital market efficiency. It is also linked to the city and state’s preparations for the Simhastha Kumbh Mela, one of the world’s largest spiritual gatherings demonstrating how capital markets can support globally significant civic events.
The shift is taking place at a moment when India’s investments in urban areas need a sharp scaling. As per the NSE data, in FY2025-26 alone, 9 municipal corporations have already raised around 1000 crores, the highest municipal mobilization in any financial year. Of the total 3784 Cr raised cumulatively by 19 municipal corporations, 29% has come through green municipal bonds. This marks a major inflection point in the adoption of climate-aligned financing for Urban India.
Few states have showed the courage to institutionalise this shift as clear as Maharashtra. The Chief Minister has consistently highlighted “Maharashtra has maintained a debt to GDP ratio below 20% far better than other major states. Despite of fiscal pressure, we remain consistent to the capex and have ventured into innovative market instruments like municipal bonds. We aim to issue 15 more such bonds in the near future to raise adequate capital for urban infrastructure”. This directional conviction has enabled cities like Pune, Pimpri Chinchwad and now Nashik to become early movers in India’s municipal bonds quest.
National Stock Exchange has played a catalytic role in this transition. As the country’s largest exchange, it has emerged as the principal gateway for municipal governments entering formal capital markets. Between FY2018 and mid-2025, cities raised ₹3358 Cr through 23 bond issuances, many of them being listed on the NSE. The momentum is accelerating. In FY 2026 so far, Nashik, Bhavnagar, Surat, Greater Chennai, Varanasi and Agra have collectively raised around ₹750 Cr through the bonds listed on NSE alone. Ashishkumar Chauhan, NSE’s MD and CEO, underscores this evolving landscape succinctly: “The municipal bonds are emerging as a powerful instrument to finance resilient liveable cities while broadening the domestic investor base for infra debts”
NSE’s contribution goes beyond listings. Its frameworks for ESG linked debt, quarterly disclosures, utilization tracking and project level reporting are institutionalising modern financial governance in the city halls. It’s investor education programmes and simplified listing protocols are allowing more cities-especially tier 2 and tier 3-to enter the debt markets with confidence. This is gradually building a financial culture in which cities are rewarded for fiscal prudence and project credibility.
However, for this transition to flourish, governance reforms must deepen. Municipal corporations must be professionally managed and credit ratings though essential must be interpreted with due gravity. Ratings often reflect historic data gaps rather than actual operational capacity. Many smaller cities tend to receive low ratings simply because they lack digitised records, ring-fenced revenues or modern accounting and not because they lack capability. A reform-oriented approach is needed in this regard which encourages financial strengthening without penalising legacy limitations. In this context, pooled financing mechanisms where multiple urban local bodies can raise funds collectively are being actively explored by states like Madhya Pradesh and Maharashtra. Such pooled bonds can democratise access to capital markets for smaller cities with relatively lower standalone credit worthiness.
Municipal bonds also redefine the relationship between citizens and city governments. When the residents invest in a city bond, they shift from being passive taxpayers to active co-investors in a public infrastructure. Such a practice enables them to fund better water systems, clean rivers, efficient transport and greener public spaces while holding the Municipal Corporation accountable. From the East Asian transit bonds to American Water and sewer bonds, this model has produced some of the most resilient urban transitions on global contours. India is now crafting its own pathway. Nashik Clean Godavari bonds demonstrate the promise of blending civic pride, environmental consciousness and market participation.
This urban financial shift also connects to India’s civilization history of engaging with world through culture, commerce and connectivity. The cities like Varanasi, Dwarka, Patliputra etc. were the vibrant hubs of trade and knowledge that commanded global attention. The Indian cities of today must reclaim that legacy by building financial institutional capability to match the cultural glory.
As the nation moves towards the aspirations of Viksit Bharat @ 2047, the centrality of cities cannot be overstated. Urban centres already account for 63% of GDP and will reach nearly 75% by 2036. Achieving the national vision of a developed India will require cities that are financially empowered, socially inclusive, environmentally conscious and globally competitive. This cannot be achieved through traditional grant-based systems alone. It demands a shift to rules-based market driven and transparent financing models.
Municipal bonds, which were once a niche idea, are now becoming a foundational element of a paradigm shift. The rise of instruments like NMC clean Godavari bonds 2025 is more than a financial milestone, it is a statement of intent. It signals the emergence of cities that are confident, credit-worthy and capable of executing complex infrastructure projects. If nurtured well, this new financial architecture can transform ULBs from dependent agencies into empowered institutions that will anchor India’s economic and civic transformation.
Written by – Mr. Sudarshan, National Stock Exchange and
Mr. Piyush, PhD Scholar in Development Studies at University of Lisbon, Portugal
