(1)A Municipality may, with the prior permission of the Government, obtain loans from any financial institution or any nationalized bank or any other Municipality, and the Government may, if it considers so necessary, stand as the guarantor for payment.(2)The Government may require a Municipality to observe such financial discipline in the matter of debt servicing including the creation of a Sinking Fund, as the Government may think fit and proper and in doing so, the Government may prescribe different sets of rules for observance by different groups of Municipalities depending upon the circumstances and nature of cases.
