Premium
This is an archive article published on August 29, 2008

Cities that are more credit-worthy than states

When it comes to credit-worthiness, cities seem to have outshined the states, with capability to borrow...

.

When it comes to credit-worthiness, cities seem to have outshined the states, with capability to borrow from markets at a better rate than the state governments, if they were to go solo. At least that’s the case when one compares the credit rating of six municipal bodies with their respective states.

The municipal bodies of Nashik and Nagpur; and Surat, Ahmedabad, Vadodra and Rajkot that fall in Maharashtra and Gujarat have better credit ratings than their states. While these six cities fall under investment-grade ‘A’ category, with positive outlook, the two states — Gujarat and Maharashtra — have a much lower credit rating at ‘BBB’ with a positive outlook.

When contacted by The Indian Express, an expert from Crisil pointed out, “If state governments go to the markets to raise funds on their own, not backed by RBI, they will be borrowing at a much higher rate than city municipal bodies.”

Story continues below this ad

“Most ratings in the investment grade are significantly higher than the credit risk profiles of the respective state governments. This means that the ratings of ULBs are not constrained by the state government ratings,” Crisil’s senior director Raman Uberoi said. The credit ratings have been carried out for 16 ULBs by the rating agency Crisil under mandate from the urban development ministry as a part of Jawaharlal Nehru National Urban Renewal Mission. The agency has assigned investment-grade corporate credit ratings to ten out of 16 municipal bodies it rated. The remaining four are Kolkata, Panaji, Dehradun and Nanded. A higher rating would help ULBs access the debt market and to play central role in the development of a municipal bond market in India.

The cities which received non-investment grade ratings or are likely to default on its debt obligations are Asansol, Ranchi, Howrah, Haridwar, Bodhgaya and Jamshedpur, with the latter three in the high-risk category.

Latest Comment
Post Comment
Read Comments
Advertisement
Advertisement
Advertisement
Advertisement