With the exercise of Credit Rating of cities and towns gaining momentum, 94 of the 500 cities included in Smart City Mission and Atal Mission for Rejuvenation and Urban Transformation (AMRUT) have obtained credit ratings which are necessary for issuing Municipal Bonds for mobilization of resources.
NDMC, Navi Mumbai and Pune have gained AA+ Credit Rating while Ahmedabad, Visakhapatnam and Greater Hyderabad Municipal Corporation have got AA credit rating. During the review of progress of Credit Rating exercise taken by Minister of Urban Development M.Venkaiah Naidu recently, it was revealed that 55 of these cities have got ‘Investment Grade’ ratings. Minister noted that 59 per cent of cities assessed getting Investment Grade rating was better than what was thought of about the financial situation of Urban Local Bodies in the country.
The 94 cities that have so far been assigned Credit Ratings are spread across 14 States. Ministry of Urban Development is promoting Credit Rating of cities as one of the five Transformational Reforms under which about 500 cities and towns that account for about 65 per cent of total urban population were to be given credit ratings during this year.
Of the total 20 ratings, ranging from AAA to D, BBB- is the ‘Investment Grade’ ratings and cities rated below BBB- need to undertake necessary interventions to improve their ratings for obtaining positive response to the Municipal Bonds to be issued.
Credit ratings are assigned based on assets and liabilities of urban local bodies, revenue streams, resources available for capital investments, Double Entry Accounting practice and other governance practices. Besides the Credit Rating of Urban Local Bodies, ratings for individual projects for which resources are to be mobilised through Municipal Bonds would have a bearing on the response to such bonds.
As per the reforms timelines suggested by the Ministry of Urban Development, 39 cities that have got Credit Ratings below the investment grade (BBB-) and they would have to undertake necessary interventions for improving the ratings in one year.