The Central government may set up an independent agency to manage its debt. This has been decided after years of discussions with the Reserve Bank of India. As a starter, the Finance Ministry may shortly set up a Public Debt Management Cell (PDMC) in the Budget Division.
This interim arrangement may facilitate separation of debt management functions from RBI to the Public Debt Management Agency (PDMA) in a gradual and seamless manner, without causing market disruptions.
The setting up of the PDMA has been a top priority for the government as it would help divest the RBI of its dual and often conflicting roles as the banker and manager of the Centre’s borrowing.
According to the Finance Ministry, the PDMC may initially have advisory functions to avoid “any conflict” with the statutory powers of the RBI. To start with, it would plan the borrowings of the Centre, manage the Central government liabilities, and monitor the cash balances.
It would also develop an integrated debt database system as a centralised database for all liabilities of the government on a near real-time basis.
To be initially located in the RBI’s Delhi office, the PDMC may also advise the government on matters related to investment, capital market operations and interest rates on small savings as well as undertake requisite preparatory work for PDMA.
The PDMC may be staffed with 15 “experienced” debt managers from the Budget Division, RBI, middle office and other units and would be under the overall supervision of the Joint Secretary (Budget), Department of Economic Affairs.
“The transition process from PDMC to PDMA would be implemented by a joint implementation committee (JIC),” said the Ministry in a statement. The JIC would, in turn, be supervised by the monitoring group on cash and debt management that would be co-chaired by Economic Affairs Secretary and RBI Deputy Governor.
Former Finance Minister Pranab Mukherjee had first announced the setting up of PDMA in Budget 2011-12, which was later also backed by the Financial Sector Legislative Reforms Commission in its report in 2013.
The proposal was then taken up by Finance Minister Arun Jaitley in the Budget 2015-16 but was later withdrawn during the discussion on the Finance Bill, 2015.