Delhi govt sets up new sinking fund to repay outstanding liabilities

The Delhi government’s outstanding debt stood at ₹30,556.54 crore at the end of March 2025, including ₹3,326.39 crore in non-plan loans received from the Centre in 2013-14

The Delhi government has notified a new consolidated sinking fund to help repay its outstanding liabilities, with the scheme coming into operation from the current financial year, 2026-27, according to an official gazette notification.

The notification, published on August 24, said the new fund will replace the existing fund under the earlier consolidated sinking fund scheme. The balance in the existing fund as of March 31, 2026, will be transferred to the new fund.

The fund will be used as an “amortization fund for redemption of the outstanding liabilities of the government”, which will include both internal debt and public account liabilities.

The Delhi government’s outstanding debt stood at ₹30,556.54 crore at the end of March 2025, including ₹3,326.39 crore in non-plan loans received from the Centre in 2013-14 to meet the outstanding liabilities of DVB/DESU and ₹447 crore for the Chandrawal Water Treatment Plant under the Delhi Water Supply Improvement Project, aided by JICA. The outstanding debt was equivalent to 2.30% of Delhi’s GSDP in 2025-26.

The government can contribute from its general revenue or other sources, including disinvestment proceeds, but “shall not fund its contribution to the fund out of borrowings from the Reserve Bank.”

The fund and the income earned from it will be kept outside the government’s general revenue and administered by the central accounts section of the Reserve Bank of India in Nagpur.

The money will be invested in Government of India dated securities, special securities of the Centre, Treasury Bills and state government securities of other states, as determined by the RBI in consultation with the Delhi government.

The notification also restricts withdrawals. “No withdrawals will be allowed from the Fund until completion of five years from the date of constitution of the fund.” Withdrawals can be made from the following financial year, subject to prescribed limits.

The fund can only be used to repay the government’s outstanding liabilities. However, the government can avail short-term accommodation under the RBI’s Special Drawing Facility against investments made in the fund to meet temporary cash-flow mismatches, subject to RBI conditions.

The government will pay the RBI a commission of 1/8 per cent of one per cent on the fund’s turnover.