Amendment to SEBI (Issue and Listing of Municipal Debt Securities) Regulations, 2015 (“ILMDS Regulations”)

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CIRCULAR

HO/17/11/24(1)2026-DDHS-POD1/I/18526/2026 August 11, 2026

To,

All Issuers who have listed/ propose to list municipal debt securities (listed

entities)

All Recognized Stock Exchanges,

All Recognized Depositories,

All Registered Merchant Bankers

Madam/ Sir,

Subject: Amendment to SEBI (Issue and Listing of Municipal Debt Securities)

Regulations, 2015 (“ILMDS Regulations”)

1. SEBI had constituted a Working Group (“WG”) in August 2024 to provide suggestions

and recommendations in respect of changes required in the regulatory framework for

municipal debt securities. Based on the recommendations of the WG and public

comments received on the same, certain amendments to the ILMDS Regulations were

notified vide Gazette Notification SEBI/LAD-NRO/GN/2026/305 dated July 08, 2026

[“SEBI (Issue and Listing of Municipal Debt Securities) (Amendment) Regulations,

2026”]. Further, changes to the extant framework for municipal debt securities in

respect of certain operational aspects are being specified through this circular.

2. Face value of municipal debt securities:

2.1. Regulation 22 of the ILMDS Regulations provides that “The face value of

municipal debt securities shall be disclosed in offer document or placement

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memorandum in the manner as specified by the Board”. Accordingly, the following

is being specified in respect of the face value of municipal debt securities issued

on private placement basis:

i. The face value of each municipal debt security shall be Rs. One Lakh or Rs.

Ten Thousand, as deemed fit.

ii. The municipal debt security issued at a face value of Rs. Ten Thousand

shall have a fixed maturity and shall be without any structured obligations.

iii. The trading lot of the listed municipal debt security issued on private

placement basis, traded on a Stock Exchange, shall always be equal to the

face value of such security.

iv. The requirements related to face value specified above are applicable only

for privately placed municipal debt security and not for public issues.

3. Two-step escrow account mechanism in case issuer is a pooled finance vehicle:

3.1. SEBI Circular No. SEBI/HO/DDHS/CIR/P/134/2019 dated November 13, 2019

(“Circular”), inter alia, specifies requirements related to the escrow payment

mechanism for issuers of municipal debt securities. In case the listed entity is a

pooled finance vehicle/ Special Purpose Vehicle (SPV) set up under the Pooled

Finance Development Fund Scheme of the Government, a “two-step escrow

account mechanism” shall ensure timely repayment of interest/ redemption to the

investors. Accordingly, it has been decided to insert the following provisions in the

Circular, after paragraph 4.1.4:

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“4.1.5. In case the listed entity is a pooled finance vehicle/ Special Purpose

Vehicle (SPV) set up under the Pooled Finance Development Fund

Scheme of the Government of India, the constituent municipalities are

required to create all the above accounts and comply with the

requirements specified for the same.

Further, the SPV/ pooled finance vehicle shall maintain an “Interest

payment account” and a “Sinking fund account”, to which funds from the

respective “Interest payment account” and “Sinking fund account”

maintained by the constituent municipalities shall be transferred, as per

the agreement between the SPV and the constituent municipalities. The

SPV/ pooled finance vehicle shall throughout the tenure of the municipal

debt securities maintain an amount equivalent to one year interest

obligation in the Interest payment account.

4.1.6. The SPV/pooled finance vehicle may include following forms of credit

enhancement to enhance credit rating and provide greater protection to

investors:

i. Additional cash collateral

ii. Program equity by the state government

iii. Access to state finance commission devolutions to ULBs

iv. Full or partial credit guarantee from a high rated development

finance institution (DFI) or multilateral institution”

v. Any other appropriate credit enhancement structure

4. Timelines for submission of financial results to the stock exchange(s):

4.1. The said Circular also specifies the following timelines in respect of submission of

financial results to the stock exchange(s) by the municipalities:

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“2.1.1. Half Yearly Unaudited Financial results

(a) The listed entities shall prepare and submit half yearly un-audited financial

results to the stock exchange as soon as the same are available but within forty

five days of the end of the first half year.

2.1.2. Annual Audited Financial results

(a) The listed entities shall submit annual audited financial results for the financial

year, within sixty days from the end of the financial year along with the audit

report.”

4.2. Considering the practical challenges faced by municipalities during data

collection, interdepartmental coordination and meeting disclosure requirements,

so as to comply with the above timelines, it has been decided to relax the said

timelines as under:

“2.1.1. Half Yearly Unaudited Financial Results

(a) The listed entities shall prepare and submit half yearly un-audited financial

results to the stock exchange as soon as the same are available but within sixty

days of the end of the first half year.

2.1.2. Annual Audited Financial Results

(a) The listed entities shall submit annual audited financial results for the financial

year, within ninety days from the end of the financial year along with the audit

report.”

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5. The provisions of this circular shall be applicable with immediate effect.

6. The Circular is issued in exercise of the powers conferred under Section 11(1) of the

Securities and Exchange Board of India Act, 1992 read with Regulation 29 of SEBI

(Issue and Listing of Municipal Debt Securities) Regulations, 2015 to protect the

interest of investors in securities and to promote the development of, and to regulate

the securities market.

7. This Circular is available at www.sebi.gov.in under the link “Legal  Circulars”.

Yours faithfully,

Rohit Dubey

General Manager

Department of Debt and Hybrid Securities

+91-022 2644 9510

rohitd@sebi.gov.in