Delhi govt, RBI ink MoU to raise funds via market borrowing

According to a government official privy with the details of the plan, the MoU designates the RBI as the banker, debt manager, and financial agent for Delhi.

The Delhi government on Monday signed a memorandum of understanding (MoU) with the Reserve Bank of India (RBI) that will allow it to raise funds through market borrowing at competitive rates to finance major infrastructure projects in the Capital, the government said.

Chief minister Rekha Gupta described the memorandum of understanding as a “historic correction” in Delhi’s financial governance. (PTI)

Chief Minister Rekha Gupta, who also holds the finance portfolio, described the memorandum of understanding (MoU) as a “historic correction” in Delhi’s financial governance.

“This MoU marks a historic correction in Delhi’s financial governance. Despite being the nation’s capital, Delhi was denied the benefits of structured RBI banking and market borrowings for years. Earlier governments never showed the intent to adopt globally accepted norms of fiscal prudence,” she said.

She stated the arrangement would end the city’s reliance on high-cost borrowing from alternative sources and integrate it fully with the central banking system.

“For the first time, Delhi will raise funds from the open market at competitive interest rates of approximately 7% through state development loans, replacing earlier high-cost borrowing at interest rates of 12-13% from alternative sources,” a statement from the chief minister’s office said.

Gupta said that all funds raised through market borrowings will be utilised exclusively for capital expenditure and asset creation. “The priority sectors to benefit from this financing include Yamuna rejuvenation and drainage infrastructure; drinking water supply systems; roads, flyovers, and other essential urban infrastructure and public transport and urban mobility,” she said.

According to a government official privy with the details of the plan, the MoU designates the RBI as the banker, debt manager, and financial agent for Delhi. This will enable low-cost liquidity support, automatic investment of surplus funds, and structured market borrowings. A government official said the pact brings Delhi “at par with other states and Union territories with legislatures, benefiting from RBI’s professional banking.”

The CM criticised previous administrations, alleging that successive Aam Aadmi Party (AAP) governments left surplus cash idle and borrowed at high rates, imposing an “unnecessary burden on public finances.”

Under the new system, excess government cash will be automatically invested daily through RBI mechanisms.

The agreement follows a December 2025 meeting between Gupta and Union finance minister Nirmala Sitharaman. It aligns with a Government of India notification effective January 9, 2026, which separates Delhi’s public accounts from the central government’s, granting the Capital an independent banking and borrowing structure.