RBI Includes Municipal Debt Securities as Eligible Collateral for Repo

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  • Last Updated on 13 November, 2025

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municipal debt securities repo eligibility

Notification No. RBI/FMRD/2025-26/142 FMRD.DIRD.04/14.03.038/2025-26, Dated 11.11.2025

1. Background

The Reserve Bank of India (RBI) has issued the Master Direction – Reserve Bank of India (Repurchase Transactions (Repo)) Directions, 2025, updating the regulatory framework governing repo and reverse repo transactions in India’s money market.

These Directions consolidate and update existing provisions to reflect evolving market practices and broaden the scope of eligible collateral instruments.

2. Key Update – Inclusion of Municipal Debt Securities

A significant change introduced under the 2025 Directions is the inclusion of Municipal Debt Securities as eligible securities for participation in repo and reverse repo transactions.

This measure aims to:

  • Enhance liquidity and marketability of municipal bonds,
  • Facilitate price discovery and secondary market depth, and
  • Encourage greater participation by institutional investors in urban infrastructure financing.

3. Applicability

The updated Directions are effective immediately and apply to all participants permitted to undertake repo and reverse repo transactions under the RBI framework, including banks, primary dealers, and other eligible entities.

4. Significance

By expanding the list of eligible collateral to include municipal debt instruments, the RBI continues its efforts to:

  • Strengthen the municipal bond market,
  • Promote financial inclusion in local government financing, and
  • Align India’s repo market practices with global best standards.
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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied