Muni bonds are issued by which of the following institutions?

The correct answer is option 1) i.e. Local Governments.

• Municipal bond also known as 'Muni bond'  are loans investors make to local governments.
• They are issued by cities, states, or other local governments.
• For that reason, the interest they pay on the bonds is tax-free.
• Recently SEBI  announced relaxation in norms for 'Muni Bonds' to help smart cities and other registered entities working in areas of city planning and urban development work like municipalities to raise funds through issuance and listing of their debt securities.
• Municipal bonds exist in India since the year 1997. Bangalore Municipal Corporation is the first urban local body to issue municipal bonds in India. \
• The municipal bonds lost the ground after the initial investors’ attraction it received and failed to raise the desired amount of funds. To revive the municipal bonds, the market watchdog SEBI came up with guidelines for the issue of municipal bonds in 2015.
• A municipality should meet the following eligibility criteria to issue municipal bonds in India:
  • The municipality must not have a negative net worth in each of the three previous years.
  • The municipality must have no default in the repayment of debt securities and loans availed from the banks or non-banking financial companies in the last year.
  • The municipality, promoter and directors must not be enlisted in the wilful defaulters published by the Reserve Bank of India (RBI). The municipality should have no record of default in the payment of interest and repayment of principal with respect to debt instruments.