Government withdraws proposal to set up independent debt management body

NEW DELHI: The government has withdrawn the budget proposal to set up an independent debt management body to manage its borrowing and the public debt. This is currently done by the Reserve Bank of India ( RBI).

Finance minister Arun Jaitley said the proposal will be firmed in consultation with the RBI over the course of the year, making a strong case for a body equidistant from both the government and the RBI.

There were significant differences between the RBI and the finance ministry over the proposal and the consequence loss of some regulatory powers for the RBI.

Apart from creating of PDMA, the budget had also proposed to shift the regulation of government bonds from RBI to market regulator Securities and Exchange Board of India (SEBI), a move that had been questioned by the central bank.

FM made a statement in the Lok Sabha before initiating the debate on finance bill, explaining the government’s decision to withdraw the provisions relating to setting up of an independent Public Debt Management Agency (PDMA).

“Since the RBI has been handling public debt management, the government in consultation with the RBI will prepare a detailed roadmap separating the debt management function and the market infrastructure from the RBI and having a unified financial market,” FM said in Lok Sabha.

“It has, therefore been decided to delete the PDMA provisions from the finance bill for this financial year,” FM said even as he strongly reiterated the government’s resolve to push ahead.

“Government is committed to unifying the financial markets both by making the government securities part of this market as well as creating a proper bond-currency-derivatives nexus,” the FM said.

Earlier many members object to government’s decision to include the proposal in the finance bill. Some members had given a notice on Wednesday evening opposing the inclusion of the PDMA proposal.