SEBI amends ILMDS Regulations on municipal debt face value & Escrow

Summary: The ILMDS Regulations framework governing the issue and listing of municipal debt securities has been amended through HO/17/11/24(1)2026-DDHS-POD1/I/18526/2026 dated 11th August 2023. For privately placed municipal debt securities, the face value shall be Rs. One Lakh or Rs. Ten Thousand, as deemed fit; securities with Rs. Ten Thousand face value shall have fixed maturity and no structured obligations, while the trading lot shall equal the face value. These face value requirements do not apply to public issues. The amendments also specify timelines for submission of half-yearly unaudited and annual audited financial results, stating timelines of forty-five and sixty days in one set of provisions and sixty and ninety days in another. A two-step escrow mechanism has been added for pooled finance vehicles/SPVs under the Pooled Finance Development Fund Scheme, with constituent municipalities required to create the specified accounts. Credit enhancement may include additional cash collateral, state government program equity, access to state finance commission devolutions, guarantees from highly rated institutions, or other appropriate structures. The circular applies with immediate effect.

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

What is “ILMDS Regulations”

The ILMDS Regulations (Issue and Listing of Municipal Debt Securities Regulations, 2015) are SEBI’s framework governing how Indian municipalities issue and list bonds. They were last amended in July 2026, introducing stricter disclosure norms, face value requirements, and escrow mechanisms to protect investors.

Key Amendments in HO/17/11/24(1)2026-DDHS-POD1/I/18526/2026 dated 11th August 2023 related to face value

• The face value of each municipal debt security shall be Rs. One Lakh or Rs. Ten Thousand, as deemed fit.
• 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.
• 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.
• The requirements related to face value specified above are applicable only for privately placed municipal debt security and not for public issues.

Key Amendments in HO/17/11/24(1)2026-DDHS-POD1/I/18526/2026 dated 11th August 2023 related to Timelines for submission of financial results to the stock exchange(s)

• 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.
• 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.
• 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.
• 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.

New provision added for “Two-step escrow account mechanism in case issuer is a pooled finance vehicle”

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.

The SPV/pooled finance vehicle may include following forms of credit enhancement to enhance credit rating and provide greater protection to investors:

1. Additional cash collateral
2. Program equity by the state government
3. Access to state finance commission devolutions to ULBs
4. Full or partial credit guarantee from a high rated development finance institution (DFI) or multilateral institution”
5. Any other appropriate credit enhancement structure

Effective Date

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