RBI unions write to MPs, state FMs against PDMA

MUMBAI: Ahead of Urjit Patel taking over as the new Governor, Reserve Bank employee unions have appealed to Parliament members and state finance ministers to prevent the proposed Public Debt Management Agency (PDMA), saying that moving the function will cost the government dearly.

"Holding of government securities by the central bank in a developing economy is always advantageous. The argument for separation of public debt management from the RBI is hardly relevant in our context," says the letter written last week.

The letter, written by the All-India Reserve Bank Employees Association, All-India Reserve Bank Workers Federation, All-India Reserve Bank Officers Association and the Reserve Bank of India Officers Association, has been addressed to MPs across party lines as well as to the states' finance ministers.

Finance Minister Arun Jaitely in the 2016 Budget proposed to divest the public debt management functions from the RBI by setting up a separate body under the finance ministry as an autonomous agency "to bring both the country's external borrowings and domestic debt under one roof".

But following opposition from the RBI, he dropped the proposal from the 2016 Finance Bill. The minister, however, said the government, in consultation with RBI, will prepare a road map to pursue a separate debt management agency later, in line with the global practices.

The PDMA will act as an investment banker to the government and will raise capital through bonds. At present, the RBI is handling the government's borrowing programme and setting up of PDMA requires amendments to the RBI Act.