Q. With reference to the “Municipal bonds”, which of the following statements is/are correct?
1. It is a kind of debt instrument where investors offer loans to local governments.
2. Surat was the first city in south Asia to launch a municipal bond.
Select the correct answer using the code given below:

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: A
Notes:

A municipal bond is a kind of debt instrument where investors offer loans to local governments.  

They are issued by civic bodies for specific projects and usually have a 10-year tenure. The ULB pays the annual interest on the bonds to the investor at the decided rate. 

  • Ahmedabad was the first city in south Asia to launch a municipal bond of Rs 100 crore in 1998, which was completely subscribed.  
  • Surat Municipal Corporation was the second city in Gujarat to announce bonds in 2018, to fund a sewage treatment project worth Rs 450 crore. 
  • The Vadodara Municipal Corporation (VMC) is expected to launch municipal bonds in January, and will become the third Urban Local Body (ULB) in Gujarat to use this method to raise money to fund development work sanctioned under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT). 

Source: Indian Express