New Delhi, Oct. 27 -- The Finance Ministry has permitted the use of municipal bonds as security for repo and reverse repo transactions, permitting municipal bodies to raise funds for infrastructure projects, reported Business Line.

By making these bonds acceptable collateral for short-term borrowing, the government has opened a new door for banks, mutual funds, insurers and companies to invest in them, creating a new asset class.

Experts say this move will broaden the investor base for such securities, boosting demand and liquidity. So far, municipal bonds have remained largely illiquid, held by a narrow pool of long-term investors such as pension or ESG funds. By allowing their use in repo markets, the government has allowed a wider sp...