These DRRs indicate institutional credit rating of ULBs to provide a reference point to potential lenders — revealing their credit-worthiness by providing an assessment of its debt servicing capacities and a realistic projection of its finances. On being contacted by The Indian Express, urban development ministry secretary M Ramachandran said, “This is for the first time that all cities have been accredited. Now, cities will know where they stand (on credit-worthiness).”

The draft credit ratings of 46 ULBs, a copy of which is with The Indian Express, reveal that 14 ULBs have been assigned ‘A’ or above ‘A’ category rating. These include eight cities in Maharashtra (Nashik, Nagpur, Pune, Navi Mumbai and Greater Mumbai), four in Gujarat (Rajkot, Surat, Ahmedabad and Vadodara) Kolkata in West Bengal, and the union territory of Chandigarh. However, municipalities of Bodhgaya, Haridwar and Jamshedpur have the lowest rating of ‘B’ category. The 18 states included Maharashtra, Uttar Pradesh, Madhya Pradesh, Gujarat, Assam, Haryana, Himachal Pradesh, Jammu and Kashmir, Jharkhand, Rajasthan, Uttarakhand, Kerala, Karanataka, Tamil Nadu, West Bengal, Bihar, Punjab and Goa. For the rest of the cities, the ratings process and the finalisation of rating reports is likely to be completed by July-end.

“They (ULBs ranked ‘B’) can bring about improvement. We will help them in the process of improving their rating by looking at their financials. The World Bank will also be working with these cities in addition to four accrediting agencies to monitor their improvement,” Ramachandran added.

With these initial ratings, the government will assess the current health of each ULB and also sensitise them on specific areas where improvements are required. The ratings indicate the absolute distance to be traversed by each ULB for achieving the stage of financial viability. The initial ratings will also include the relative rating of all ULBs.

In the second phase the government will launch review exercises to serve as benchmarks for monitoring financial and operational improvements under the reform agenda proposed under JNNURM. These ratings will then be shared with key stakeholders to assist ULBs to move closer to markets to access funds and finance their project investments.

Last year, the government had appointed four credit rating agencies via a bidding process — CRISIL, ICRA, Fitch Ratings and CARE — to carry out credit-worthiness ratings. The local bodies in 46 cities were rated on the basis of legal and legislative framework, economic base of the service area, municipal finances, operations and service delivery and municipal management.

•DRRs indicate institutional credit rating of ULBs to provide a reference point to potential lenders

•The reports reveal municipalities’ credit-worthiness by providing an assessment of their debt servicing capacities

•While 14 ULBs have been assigned ‘A’ or above ‘A’ category, Haridwar and Jamshedpur have the lowest rating of ‘B’ category

•With these initial ratings, the government will assess the current health of each ULB and sensitise them on specific areas where improvements are required