Debt management process of shifting from rbi

Debt management process of shifting from rbi

After successfully setting up the Monetary Policy Committee (MPC) recently to set policy interest rates, the finance ministry on Wednesday initiated steps to set up an independent Public Debt (ऋण, कर्ज) Management Agency (PDMA) to take over the government debt management functions from the Reserve Bank in two years.

In an office memorandum, the ministry said a decision has been taken to set up a Public Debt Management Cell (PDMC) in the Budget division of the Department of Economic Affairs, as an interim arrangement before setting up an independent and statutory PDMA, in due course.

“This interim arrangement will allow separation of debt management functions from RBI to PDMA in a gradual and seamless manner, without causing market disruptions (अवरोध, दरार) . The PDMC shall be upgraded to a statutory PDMA, in about 2 years,” the memorandum said. Till such time, the PDMC will have only advisory functions to avoid any conflict with the statutory functions of RBI, it added.

The PDMC advisory functions would include planning and management of central government borrowings, monitor cash balances, improve cash forecasting and promote efficient cash management practices. Other functions included foster (प्रोत्साहन, बढावा) a liquid and efficient market for government securities, develop an Integrated Debt Database System (IDMS) as a Centralised data base for all liabilities of government and undertake requisite (अपेक्षित, आवश्यक) preparatory work for PDMA.

The joint secretary (budget) would be the overall in-charge of the PDMC, which will be housed at the RBI’s Delhi office. The transition (परिवर्तनकाल, गुजरना) process from PDMC to PDMA would be implemented by a joint implementation committee (JIC).

JIC would operate under the supervision of the Monitoring Group on Cash and debt management with economic affairs secretary and RBI deputy governor as co-chairpersons. The PDMC would be staffed by 15 debt managers from Budget division, RBI, current middle office and other government units. The extant (वर्तमान में, मौजूदा) middle office of the Budget division in the ministry will be subsumed (विलय, सम्मिलित) into PDMC with immediate effect.

The creation of the PDMA, it is reckoned (हिसाब, गणना) would enable RBI to focus on its core function of monetary policy (flexible inflation-targeting) and regulating banks. Such an agency is also expected to lower the government’s borrowing costs eventually and foster a liquid and efficient G-Secs market.

The idea is also to resolve the conflict of interest (एक ऐसी स्थिति जिसमें किसी अधिकारी का निर्णय उसके व्यक्तिगत लाभ से प्रभावित हो) involved in RBI, simultaneously (साथ-साथ) targeting inflation by calibrating interest rates and regulating as well as managing government debt.

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