The Reserve Bank of India has announced a significant administrative change that will see it taking over the banking operations of the Delhi government. Starting January 9, 2026, the central bank will assume responsibility for general banking operations and public debt management of the Government of National Capital Territory of Delhi.

Agreement Details

The RBI formalized this arrangement through an official agreement signed under sub-section (1) of Section 21A of the Reserve Bank of India Act, 1934. This legislative provision enables the central bank to enter into such agreements with state governments for banking services.

Scope of Operations

Under the new agreement, the RBI will handle two primary functions for the Delhi government. The central bank will carry out all general banking business operations, which typically include account management, transaction processing, and routine banking services. Additionally, the RBI will manage the rupee public debt of the Delhi government, encompassing debt issuance, servicing, and related financial operations.

Implementation Timeline

The transition will become effective from January 9, 2026, providing approximately two years for preparation and coordination between the RBI and the Delhi government. This timeline allows for proper planning and system integration to ensure seamless banking operations.

The announcement represents a formal consolidation of state government banking operations under the RBI's direct management, following established procedures under the Reserve Bank of India Act.

India is expected to maintain the Reserve Bank of India's current inflation target when the mandate comes up for renewal in March, according to finance ministry officials familiar with the matter. The government views the existing framework as effective in managing price pressures and maintaining economic stability.

Current Inflation Framework Details

The inflation targeting system has been guiding monetary policy decisions since its implementation in 2016. The framework's key parameters are outlined below:

Framework Performance and Effectiveness

The inflation targeting mechanism has demonstrated its resilience across various economic challenges. Finance ministry officials, speaking on condition of anonymity as discussions remain private, highlighted the framework's success in containing price volatility during multiple supply shocks triggered by geopolitical events.

India's inflation rate showed an uptick in November from a record low in the previous month but remained well below the central bank's 4% target. This performance reinforces the government's confidence in the existing system's ability to anchor price expectations effectively.

Stakeholder Consultation Process

The government has actively sought feedback from the Reserve Bank of India regarding the inflation target framework. Following internal deliberations and comprehensive consultations with various stakeholders, the central bank has expressed preference for maintaining the current arrangement.

The target serves as a crucial guide for the central bank's interest-rate decisions, helping maintain price pressures within the designated band while keeping inflation anchored around the mid-point over the medium term. This systematic approach has contributed to greater predictability in monetary policy implementation.

Policy Implications

The decision to retain the 4% inflation target reflects continuity in India's monetary policy approach. The framework has provided a stable foundation for economic planning and has helped establish credible inflation expectations among market participants and the general public.

The Ministry of Finance has not provided immediate comment on the matter, though officials indicate that formal announcements regarding the inflation target renewal are expected closer to the March deadline.