Chapter VIII MUNICIPAL FUND

Municipal Fund: There shall be constituted for each Municipality a fund to be called Municipal Fund to be held by the Board of Councillors in trust for the purposes of this Act, and all moneys realised or realisable under this Act and all moneys otherwise received by the Municipality shall be credited thereto.

Custody of Municipal Fund: All moneys received on account of the Municipal Fund shall be paid into a Government treasury or into any bank in the municipal area, and shall be credited to any account to be called the account of the Municipality to which they belong: Provided that the Executive Council may invest moneys not required for immediate use, either in Government securities or in any other form of security which may be approved by the State Government or in fixed deposit in the State Bank of India or in any nationalised bank or Co-operative Bank, or in any other form as the State Government may direct.

Application of Municipal Fund:

1. (1) All moneys credited to the Municipal Fund from time to time shall be applied for payment of all sums, charges and costs necessary for carrying out the purposes of this Act and the rules and the regulations made thereunder or for payment of all sums payable out of the Municipal Fund under any other law for the time being in force.
2. (2) No payment for any sum shall normally be made out of the Municipal Fund unless such expenditure is covered by a current budget grant and a sufficient balance of such budget grant is available for the purpose.
3. (3) Whenever any sum is paid for the purposes not covered by the budget grant, the matter shall forthwith be communicated to the Executive Council which shall take such action under the provisions of this Act as may appear to it to be feasible and expedient for covering the amount of such payments.

Exclusive use of fund for a particular purpose: Notwithstanding anything in this Act, the State Government may require a Municipality to earmark a particular portion of the Municipal Fund or a particular grant or a part thereof, or any item of receipt under any head or any percentage thereof, or any share of tax receivable by the Municipality under any other law for the time being in force or any part thereof, to be utilised exclusively for any specified purpose, and it shall be mandatory on the part of the Municipality to follow the same.

Financial assistance from the State Government:

1. (1) The State Government may, from time to time, give grant or financial assistance to a Municipality with or without direction as to the manner in which the sum shall be applied.
2. (2) The State Government may also lay down a pattern for distribution of such grants or assistance which may include the conditions of release of grants and classification of municipalities for the purpose.

Loans:

1. (1) A Municipality may, with the prior permission of the State Government, obtain loan from any public financial institution or any nationalised bank or such other lending institution as the State Government may approve in this behalf, and the State Government may, if it considers so necessary, stand as the guarantor for payment.
2. (2) The State Government may advance from the public funds or stand as guarantor for funds for any financial institution on the security of the Municipal Fund and, in the case of a joint scheme, on the security of the Municipal Fund and the fund of other local authorities, if any, to provide for the cost of installation or maintenance relating to any project or scheme for civic services and such advance shall recoverable under such rules as may be made by the State Government for the purpose.
3. (3) The State Government may require the Municipality to observe such financial discipline in the matter of debt servicing, including creation of a sinking fund, as the State Government may think fit and proper and, in doing so, the State Government may prescribe different sets of rules for observance by different classes of Municipalities.

Power to incur expenditure beyond the limits of a Municipality: Notwithstanding anything contained elsewhere in this Chapter, the Board of Councillors may, with the approval of the State Government, authorise expenditure to be incurred beyond the limits of a municipal area for creation of physical assets outside the limits of such municipal area as well as for maintenance thereof for carrying out the purposes of this Act.