In a significant move for its financial autonomy, the Government of the National Capital Territory of Delhi (GNCTD) has entered a new era by securing the ability to borrow directly from the open market. This shift ends its long-standing and costly dependence on loans from the National Small Savings Fund (NSSF) for funding capital projects.
A Long-Awaited Financial Reform
The Reserve Bank of India (RBI) announced on Monday that it has signed an agreement with the Delhi government. Starting January 9, the central bank will manage Delhi's general banking business and its rupee public debt. This establishes a separate "public account" for Delhi, a facility that all other states and Union Territories already possessed.
Previously, Delhi was an outlier. Its account was merged with the Central government's, which prevented it from accessing the market for loans. Consequently, the city had to seek funds through the NSSF, where interest rates were significantly higher. "Only Delhi was left. As it did not have a separate account, it could not borrow money from the markets," a senior official explained.
From High-Cost to Competitive Borrowing
The financial implications of this change are substantial. Officials state that Delhi will now raise funds through State Development Loans at competitive interest rates of approximately 7%. This replaces the previous high-cost borrowing from alternative sources at rates between 12% to 13%.
Chief Minister Rekha Gupta, who also holds the finance portfolio, hailed the Memorandum of Understanding (MoU) as a "transformational milestone." She criticized previous administrations, notably targeting the earlier AAP government, for failing to initiate this reform. "Despite being the national capital, Delhi was denied the benefits of structured RBI banking and market borrowings for years," Gupta stated.
The MoU was signed at the Delhi Secretariat in a meeting chaired by CM Gupta, with RBI officials and Additional Chief Secretary (Finance) Bipul Pathak. Delhi Chief Secretary Rajiv Verma was also present.
Enhanced Fiscal Management and Future Investments
Beyond cheaper loans, the agreement brings sophisticated treasury management tools to Delhi's administration. The government will now have access to Ways and Means Advances and Special Drawing Facilities from the RBI. This will allow efficient handling of temporary cash flow mismatches without expensive emergency borrowing.
Furthermore, surplus funds will be automatically invested daily through RBI mechanisms, generating interest income and eliminating losses from idle cash. CM Gupta emphasized that all funds raised through market borrowings will be exclusively used for capital expenditure. This ensures the creation of durable assets without passing short-term liabilities to future generations.
Reflecting this commitment, the Budget for 2025-26 has provisioned for capital expenditure nearly 135% higher than the previous year's actual spend. Officials indicated that the newly accessible funds are expected to be channeled into critical projects like Yamuna rejuvenation, drainage and drinking water systems, hospitals, and public transport infrastructure.
It is important to note that the annual borrowing limit for Delhi from the market will continue to be set and decided by the Central government. With this pact, Delhi joins the mainstream of state fiscal management, poised for what its government calls "a new era of fiscal prudence, institutional discipline, and infrastructure-led economic growth."
