Government Notifies Municipal Debt Securities to Be Security for Repo and Reverse Repo Transactions
The Ministry of Finance has recently issued a notification dated October 22, 2025, expanding the scope of Municipal Debt Securities. As per the notification (S.O. 4830(E) dated 22nd October, 2025, the central government, using the powers given under Section 45U(e) of the Reserve Bank of India Act, 1934, has decided that the Municipal Debt Securities can be specified as security for repo and reverse repo transactions. These securities are explained under the Securities and Exchange Board of India (SEBI) Act, 1992 and its related rules and regulations.
“In exercise of the powers conferred by clause (e) of section 45U of the Reserve Bank of India Act, 1934 (2 of 1934), the Central Government hereby specifies the Municipal Debt Securities, having the meaning assigned to it in the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the rules or regulations made thereunder, to be as security under this section for the purposes of “repo” and “reverse repo”,” the notification said.
A repo is a repurchase agreement where one party sells securities and agrees to buy them back later. These are used to borrow money for a short period, using the securities as collateral. On the other hand, the Reverse Repo is a reverse repurchase agreement, where the other party buys securities with the agreement to sell them back later. It is done to lend cash for a short period.
