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The Delhi government has signed an MoU with the Reserve Bank of India to bring the capital under a formal banking and debt management system. The RBI will act as banker and debt manager, enabling low-cost market borrowings and professional cash management. Funds raised will be used only for capital expenditure, including Yamuna rejuvenation, water supply, transport and health infrastructure. The move replaces earlier high-interest borrowings and follows approval from the Union government. From January 9, Delhi's public accounts will operate independently.
The Delhi government has entered into a Memorandum of Understanding with the Reserve Bank of India to bring the national capital under a structured and transparent banking and borrowing framework. The agreement is aimed at supporting large-scale capital expenditure, including Yamuna rejuvenation, water supply improvement and key infrastructure projects across the city. Advertisement
Under the arrangement, the RBI will act as the banker, debt manager and financial agent for the Delhi government. This will allow the government to raise funds through State Development Loans, manage surplus cash efficiently and access low-cost liquidity facilities, all within the rules set by the Government of India and the RBI Act.
Chief Minister Rekha Gupta stated that funds raised through market borrowings will be used only for capital expenditure. Priority areas include cleaning and restoring the Yamuna, strengthening drinking water supply, expanding health infrastructure, improving public transport, and building roads and flyovers.
The agreement was signed at the Delhi Secretariat during a meeting chaired by Gupta, who also holds the finance portfolio. Senior officials from both the Delhi government and the RBI were present, including Additional Chief Secretary for Finance Bipul Pathak and Chief Secretary Rajiv Verma.
Gupta described the move as a major shift in Delhi's financial governance. She said the capital had remained outside the RBI's structured banking system for years, despite being the country's political centre. According to her, previous administrations did not adopt standard fiscal practices such as professional cash management or cost-efficient borrowing.
She pointed out that surplus public funds were earlier left uninvested, while borrowings were raised at higher interest rates. This, she said, resulted in loss of interest income and avoidable pressure on public finances. The current government, she added, has placed fiscal discipline, transparency and long-term sustainability at the centre of its financial strategy.
As part of the MoU, surplus funds of the Delhi government will now be automatically invested on a daily basis through RBI mechanisms. The government will also gain access to Ways and Means Advances and Special Drawing Facilities to manage short-term cash flow gaps. Importantly, future borrowings are expected to be raised at interest rates of around seven per cent through State Development Loans, replacing earlier borrowings that reportedly carried rates of 12 to 13 per cent.
With this step, Delhi will be fully integrated into the RBI's banking, cash management and debt management systems, similar to other states. Gupta said the reform followed sustained discussions with the Union government, including her meeting with Union Finance Minister Nirmala Sitharaman in December 2025.
She also acknowledged the support of Prime Minister Narendra Modi in enabling Delhi to move to an independent and transparent banking framework aligned with national fiscal norms.
A central government notification issued last week clarified that, effective from January 9, the public accounts of the Government of National Capital Territory of Delhi will be separated from those of the Government of India. This change gives Delhi an independent banking and borrowing structure for the first time.
Source PTI
FAQ
Q1. What agreement has the Delhi government signed with the Reserve Bank of India and why is it significant?
The Delhi government has signed a Memorandum of Understanding with the Reserve Bank of India to bring the national capital under a structured banking, cash management and debt management framework. Under this arrangement, the RBI will act as Delhi’s banker and debt manager. This is significant as it allows Delhi to raise funds through low-cost market borrowings, improve financial transparency, and align its fiscal practices with national standards followed by other states.
Q2. How will the RBI support Delhi’s borrowing and cash management under this MoU?
Under the MoU, the RBI will enable Delhi to raise funds through State Development Loans, provide professional cash management services, and offer access to facilities such as Ways and Means Advances and Special Drawing Facilities. Surplus funds will be automatically invested on a daily basis through RBI mechanisms, helping the government avoid idle balances and improve overall financial efficiency.
Q3. For what purposes will the funds raised through market borrowings be used?
According to the Delhi government, funds raised through market borrowings will be used exclusively for capital expenditure. Priority areas include Yamuna rejuvenation, strengthening drinking water supply systems, expanding health infrastructure, improving public transport, and developing roads and flyovers. The government has clarified that borrowings will not be used for routine or revenue expenditure.
Q4. How does this new arrangement improve Delhi’s financial governance compared to earlier practices?
Earlier, Delhi relied on borrowings that reportedly carried higher interest rates of 12 to 13 per cent, while surplus funds often remained uninvested, leading to financial inefficiencies. Under the new system, borrowings are expected to be raised at around 7 per cent, significantly reducing interest costs. Professional cash management by the RBI is also expected to prevent loss of interest income and strengthen fiscal discipline and transparency.
Q5. What institutional and administrative changes follow from this agreement?
Following approval from the Union government, Delhi’s public accounts will operate independently from January 9, separating them from the Government of India’s accounts. This marks the first time Delhi has an independent banking and borrowing structure. The move follows consultations with the Union Finance Ministry and aligns Delhi’s financial system with national fiscal norms, enabling long-term sustainability and better coordination with central institutions.
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