It is appreciable that the government is planning an insolvency law specifically for urban local bodies (ULBs) on the lines of the United States ’ Chapter 9 Rule, under which reorganisation of the debt of financially stressed municipal corporations is done via various means like extended maturities, haircut to lenders, and refinancing. What distinguishes an insolvency regime for ULBs from that for companies and other businesses is that in the former case, liquidation can’t be an option.

There is an understated need to vastly improve the credit profile of India’s ULBs, a handful of which already resort to market-based debt financing via municipal bonds, in addition to traditional institutional arrangements. Particularly since 2018, the municipal bond market has got a fillip thanks to ena

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