Moving ahead with its long-pending agenda of setting up an independent agency to manage government borrowings, the Finance Ministry has re-initiated discussions on the Public Debt Management Agency (PDMA).
“With the framework for the monetary policy and the committee almost finalised, the next stage is to set up an independent debt management agency. The issue is being reviewed and various options are under discussion,” said a person familiar with the development.
Sources said the government is keen to make a formal announcement on the PDMA by the end of the fiscal so that the transition to it can be started by 2017-18. Issues on how to make the debt management office fully independent of both the Finance Ministry and the Reserve Bank of India as well as options including a statutory or a non-statutory status for the debt management office are under examination. The proposal also has to be discussed with the RBI.
Initially, the debt management office would only manage borrowings of the Union government, said the person.
With the Centre’s gross borrowing at about $6 lakh crore annually, plans to set up an independent debt management authority have been announced by successive Finance Ministers to enable the RBI to focus on its primary responsibility of monetary policy and inflation targeting. It would also resolve the perceived conflict of interest of the RBI as the government’s banker as well as manager of its debt.
At present, the central bank is responsible for managing the borrowing programme for both the Centre and the States.
The setting up of a PDMA was first announced in the Budget speech 2011-12 of the then Finance Minister Pranab Mukherjee, which was later also backed by the Financial Sector Legislative Reforms Commission in its report in 2013.
The proposal gained momentum last year when it was announced by Finance Minister Arun Jaitley in the Budget 2015-16 but was later withdrawn during the discussion on the Finance Bill, 2015. It was decided that a roadmap for a PDMA would be drawn in consultation with the RBI.