Delhi Government Brings Finances Under RBI Framework with Historic MoU

Delhi Government has signed a significant Memorandum of Understanding with the Reserve Bank of India, marking a major shift in the capital’s financial governance. For the first time, Delhi will operate under the RBI’s complete banking, cash management and debt management framework, aligning its finances with nationally accepted fiscal practices.

Why in the News?

The Delhi Government signed an MoU with the Reserve Bank of India to bring Delhi under the RBI’s full banking and debt management system.
This move allows RBI to act as Delhi’s banker, debt manager and financial agent.

What the MoU Provides

• Under the agreement, the RBI will manage Delhi’s banking operations, cash flows and public debt.
• The arrangement enables market borrowings through State Development Loans, automatic investment of surplus cash, and access to low-cost liquidity facilities.
• It also introduces professional cash management practices, improving efficiency and reducing borrowing costs.

Significance for Delhi’s Financial Governance

• The MoU is seen as a major reform in Delhi’s fiscal administration.
• According to the Chief Minister, it corrects a long-standing gap where Delhi lacked structured RBI support despite being the national capital.
• The agreement strengthens fiscal discipline, improves transparency, and supports long-term financial sustainability in governance.

RBI and State Finances

• The Reserve Bank of India traditionally acts as banker and debt manager for state governments.
• It manages their borrowings, cash balances, and debt instruments under frameworks approved by the Centre.
• Until now, Delhi had not fully adopted this system, making this move a significant institutional alignment.

Key Summary at a Glance

Question

Q. Which institution will now act as banker and debt manager for the Delhi Government?

A. State Bank of India
B. Ministry of Finance
C. Reserve Bank of India
D. NITI Aayog