Issuers who have listed or propose to list municipal debt securities (listed entities). Recognized Stock Exchanges. Recognized Depositories. Registered Merchant Bankers.

**Face Value (Private Placements):** Face value must be Rs. One Lakh or Rs. Ten Thousand. Securities issued at Rs. Ten Thousand must have fixed maturity and no structured obligations. Trading lots on Stock Exchanges must equal the face value. These rules do not apply to public issues. **Escrow Mechanism (Pooled Finance Vehicles/SPVs):** Constituent municipalities must create required accounts. The SPV/pooled finance vehicle must maintain an "Interest payment account" and a "Sinking fund account," ensuring the Interest payment account holds one year's interest obligation throughout the tenure. **Credit Enhancement (SPVs):** SPVs may use additional cash collateral, state government program equity, access to state finance commission devolutions to ULBs, full or partial credit guarantees from high-rated DFIs or multilateral institutions, or other appropriate structures. **Financial Result Timelines:** Half-yearly unaudited results: Deadline extended from 45 days to 60 days from the end of the first half year. Annual audited results: Deadline extended from 60 days to 90 days from the end of the financial year.

What are the new SEBI rules for Municipal Debt Securities?

Quick summary

SEBI has amended the ILMDS Regulations to specify face values for private placements, introduce a two-step escrow mechanism for pooled finance vehicles, and relax timelines for submitting financial results. These changes aim to address practical challenges and enhance investor protection for municipal debt securities.

Who is affected

Issuers who have listed or propose to list municipal debt securities (listed entities).
Recognized Stock Exchanges.
Recognized Depositories.
Registered Merchant Bankers.

What changes

Face Value (Private Placements): Face value must be Rs. One Lakh or Rs. Ten Thousand. Securities issued at Rs. Ten Thousand must have fixed maturity and no structured obligations. Trading lots on Stock Exchanges must equal the face value. These rules do not apply to public issues.
Escrow Mechanism (Pooled Finance Vehicles/SPVs): Constituent municipalities must create required accounts. The SPV/pooled finance vehicle must maintain an "Interest payment account" and a "Sinking fund account," ensuring the Interest payment account holds one year's interest obligation throughout the tenure.
Credit Enhancement (SPVs): SPVs may use additional cash collateral, state government program equity, access to state finance commission devolutions to ULBs, full or partial credit guarantees from high-rated DFIs or multilateral institutions, or other appropriate structures.
Financial Result Timelines:
Half-yearly unaudited results: Deadline extended from 45 days to 60 days from the end of the first half year.
Annual audited results: Deadline extended from 60 days to 90 days from the end of the financial year.

Action items

Private Placement Issuers: Ensure face values and trading lots comply with the specified Rs. One Lakh or Rs. Ten Thousand limits.
Pooled Finance Vehicles/SPVs: Establish the two-step escrow mechanism and ensure the Interest payment account is funded for one year's interest obligation.
Listed Entities: Update reporting calendars to align with the relaxed 60-day (half-yearly) and 90-day (annual) submission deadlines.

Key dates-deadlines

Effective Date: Immediate effect (August 11, 2026).
Half-yearly unaudited results: Within 60 days of the end of the first half year.
Annual audited results: Within 90 days from the end of the financial year.

Source reference

HO/17/11/24(1)2026-DDHS-POD1/I/18526/2026, August 11, 2026