Delhi creates dedicated fund to repay government debt

Delhi will start putting money aside for future debt repayments through a new Consolidated Sinking Fund from the 2026-27 financial year.

The dedicated reserve, approved by LG TS Sandhu, can be used only to repay the government’s outstanding liabilities. The government may contribute from regular revenue, disinvestment proceeds and other sources, but cannot borrow from the Reserve Bank of India specifically to finance those contributions.

The RBI will manage the fund and invest its money in securities, with interest added to the corpus. Delhi aims to build the reserve to 5% of its outstanding liabilities within five years.

At the end of March 2025, Delhi’s debt was Rs 30,556 crore, or 2.3% of its projected gross state domestic product for 2025-26. This included Rs 3,326 crore borrowed from the Centre for liabilities of the former DVB and DESU electricity utilities, and Rs 447 crore for the Japan International Cooperation Agency-aided Chandrawal Water Treatment Plant.

The corpus will remain unavailable for the first five years. From the following financial year, annual withdrawals will be capped at the lower of 50% of the eligible corpus or the debt repayment due that year.