New Delhi: In a significant move toward structural financial reform, the Reserve Bank of India has officially entered into an agreement to serve as the banker and debt manager for the Government of National Capital Territory of Delhi (GNCTD). The pact, signed under Section 21A of the RBI Act, 1934, marks the end of an era where the capital’s finances were largely managed through central pool allocations and high-interest small savings funds.
The agreement was formalised following a high-level meeting chaired by Delhi Chief Minister Rekha Gupta, who also holds the finance portfolio. Describing the transition as a “historic financial reform,” Gupta noted that the move would usher in an era of “institutional discipline” and “infrastructure-led growth”.
Until now, Delhi followed a unique ad-hoc system that often led to public funds sitting idle or forced the government to borrow at steep interest rates of 12-13% from the National Small Savings Fund (NSSF). Under the new RBI-managed framework, the city-state can now tap into the market through State Development Loans (SDLs) at significantly lower rates, estimated to be around 7%.
Key Features of the New Framework:
Professional Debt Management: The RBI will now handle the issuance of all rupee public debt for Delhi.
Treasury Efficiency: Any surplus cash will be automatically invested daily through the RBI, ensuring interest earnings for the exchequer.
Liquidity Support: The GNCTD will gain access to Ways and Means Advances (WMA) and Special Drawing Facilities to manage temporary cash flow mismatches.
Capital Expenditure Focus: The government has committed that all funds raised through this new market-linked route will be directed exclusively toward long-term capital projects rather than day-to-day expenses.
The transition follows a central government notification on January 2 that separated Delhi’s public accounts from those of the Government of India. This granting of an independent banking and borrowing structure effectively brings the National Capital on a par with other Indian states in terms of fiscal operations.