RBI Includes Municipal Debt Securities as Eligible Collateral for Repo

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.

Click Here To Read The Full Notification