CM Rekha Gupta Signs RBI MoU, Ends Decades-Old Fiscal Constraints in Delhi

New Delhi: In a historic and far-reaching reform that would be having a fundamentally strong impact and would be instrumental in reshaping Delhi’s public financial management framework, the Government of NCT of Delhi recently signed a landmark Memorandum of Understanding (MoU) with the Reserve Bank of India. The agreement represents a decisive break from past practices and ushers Delhi into a new era of fiscal prudence, institutional discipline and infrastructure-led economic growth.
The MoU enables the Reserve Bank of India to function as the banker, debt manager, and financial agent of the Government of NCT of Delhi, facilitating market borrowings through State Development Loans, automatic investment of surplus cash, professional cash management and access to low-cost liquidity facilities, strictly within the framework prescribed by the Government of India and the RBI Act. The MoU was signed at a meeting held at the Delhi Secretariat, chaired by the Chief Minister Delhi Rekha Gupta, between Reserve Bank of India and Delhi Government represented by Bipul Pathak, Additional Chief Secretary (Finance), Delhi Government. Senior officials from Delhi Government and the Reserve Bank of India, including Delhi Chief Secretary Rajiv Verma, were also present on the occasion.

Chief Minister Rekha Gupta, who also holds the Finance portfolio in the Delhi Government, described the MoU as a transformational milestone and a long-overdue reform that previous governments failed to initiate.

“This agreement 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 or vision to adopt globally accepted norms of fiscal prudence. Today, that decisively changes,” said CM Rekha Gupta.

Chief Minister, in her address, underlined that successive AAP governments neither invested surplus public funds nor adopted cost-efficient borrowing mechanisms. Excess cash remained idle, resulting in loss of interest income, while borrowings were undertaken at high interest rates from other sources, placing an unnecessary burden on public finances and, ultimately, on citizens.
“In contrast, this government has placed fiscal discipline, transparency and long-term sustainability at the core of governance. Every rupee of public money must now work for the people of Delhi,” she said.
Any excess cash balance with the Delhi Government will now be automatically invested on a daily basis through RBI mechanisms, generating interest income and eliminating losses caused by idle funds. Delhi will have access to Ways and Means Advances and Special Drawing Facilities from RBI, ensuring efficient management of temporary cash flow mismatches without resorting to expensive or emergency borrowing. For the first time, Delhi will raise funds from the open market at competitive interest rates of approximately 7 percent through State Development Loans, replacing earlier high-cost borrowing at interest rates of 12 to 13 percent from alternative sources.
In this historical move, it would also be for the first time that the state government would be fully integrated with the banking system of RBI so that neither any issue of compliance nor any deviation from the laid out process is found later.
With this MoU, Delhi now stands at par with one of the best globally acclaimed financial system standing at par with any of the states of the country. The impact would speak loud in very short time, because on the one hand proper utilization of the financial resources is put to use and on the other head cost of finance would see a major cut down. Currently a decimal point reduction in cost of finance can do wonders. The administrative machinery standing by the state government is equipped with intelligent minds having on hand experience in making systems and ensuring compliance. However, is correct to say that such minds were available to the earlier state governments too. However, the key is political intention which, the current state government under the capable chief minister in Rekha Gupta is very much trusted person as far as the best interest of the government, state and the people of Delhi are concerned.