Notification S.O. 4830(E), Dated: 22.10.2025
1. Notification on Municipal Debt Securities
The Ministry of Finance has issued a notification specifying that Municipal Debt Securities are recognised for certain financial operations under the Reserve Bank of India (RBI) framework.
2. Definition of Municipal Debt Securities
Municipal Debt Securities are defined under the Securities and Exchange Board of India (SEBI) Act or related rules and regulations. These securities are typically issued by municipal authorities to raise funds for infrastructure and development projects within their jurisdiction.
3. Purpose of the Notification
The notification clarifies that these Municipal Debt Securities can be used as eligible securities for repo and reverse repo transactions. This aligns municipal financing instruments with the liquidity management framework of the RBI.
4. Reference to RBI Act
Under Section 45U of the RBI Act, 1934, certain securities can be used as collateral in repo and reverse repo operations conducted by the RBI. By including Municipal Debt Securities, the notification expands the range of instruments available for liquidity support in the financial system.
5. Implications for Market Participants
- Banks and Financial Institutions – Can now use Municipal Debt Securities for short-term borrowing and lending with the RBI, enhancing liquidity management.
- Municipal Corporations – Benefit from improved marketability of their debt securities, potentially lowering borrowing costs.
- Investors – Gain confidence in the credibility and acceptability of these securities as they are recognised under the RBI framework.
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