The municipalities act came into existence in 1992 due to the 74th amendment act. It provides a new structure for the municipal system. It is a three-tier structure to look after the urban areas more effectively. This three-tier municipal system is similar to that of the Panchayati Raj system of rural areas. According to the municipalities' act and the 12th schedule of the constitution, the municipalities may have a set of 18 functionalities. While electing the people to the municipalities, the reservation categories provided high priority. This municipalities act is also known as the Nagar Palika Act. The main motto of this act is for the transparency and the growth of urban areas.