In a landmark move for the national capital's financial governance, the Delhi government on Monday entered into a historic Memorandum of Understanding (MoU) with the Reserve Bank of India. This pact is set to revolutionize how the city manages its funds, with a sharp focus on critical projects like the rejuvenation of the Yamuna river, enhancing water supply, and overall infrastructure development.
A New Era of Fiscal Discipline and Professional Management
The agreement formally appoints the RBI as the banker, debt manager, and financial agent for the Delhi government. This integration enables a suite of modern financial mechanisms, including market borrowing through State Development Loans, automatic daily investment of surplus cash, and access to low-cost liquidity facilities. All these operations will function within the established framework of the Government of India and the RBI Act.
Delhi Chief Minister Rekha Gupta, who also holds the finance portfolio, chaired the signing ceremony at the Delhi Secretariat. She described the MoU as a "transformational milestone" that decisively breaks from past practices. "This agreement marks a historic correction in Delhi's financial governance," Gupta stated, highlighting that despite being the capital, Delhi was denied structured RBI banking and market borrowings for years.
Focus on Capital Expenditure and Priority Sectors
CM Gupta made it clear that every rupee raised through new market borrowings will be channeled exclusively into capital expenditure. The identified priority sectors are:
- Rejuvenation of the Yamuna river
- Drinking water supply augmentation
- Health infrastructure development
- Public transport, roads, and flyovers
She criticized previous AAP governments for not investing surplus funds and relying on high-cost borrowing mechanisms, which she said resulted in lost interest income and an unnecessary public finance burden. "In contrast, this government has placed fiscal discipline, transparency, and long-term sustainability at the core of governance. Every rupee of public money must now work for the people of Delhi," she asserted.
Tangible Financial Benefits and Structural Change
The MoU brings concrete financial advantages. Surplus government funds will now be automatically invested daily via RBI systems. For managing temporary cash shortfalls, Delhi will have access to Ways and Means Advances and Special Drawing Facilities. Crucially, market borrowings will now happen at competitive interest rates of around 7% through State Development Loans, replacing earlier high-cost borrowings that carried rates of 12-13%.
This reform follows sustained engagement with the Union government, including a meeting between CM Gupta and Union Finance Minister Nirmala Sitharaman in December 2025. Gupta also thanked Prime Minister Narendra Modi for enabling Delhi to secure an independent banking framework aligned with national norms.
The move is underpinned by a central government notification dated January 2, effective from January 9, which separates the public accounts of the Government of NCT of Delhi from those of the Government of India. This grants Delhi its own independent banking and borrowing structure for the first time.
The signing event was attended by senior officials from both sides, including Additional Chief Secretary (Finance) Bipul Pathak and Chief Secretary Rajiv Verma. Concluding her remarks, CM Gupta emphasized, "This MoU is not merely an administrative arrangement. It is a historic financial reform that Delhi will benefit from for decades."
