Loans

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.