RBI’s sovereign debt management can help monetary policy

KOLKATA: There is no conflict of interest in the Reserve Bank of India managing government borrowings and it does not lead to rate manipulation in favour of the Centre, a research paper by the RBI has said.

“We feel there might be a confluence of interest between sovereign debt management and monetary policy, both helping each other, especially in extraordinary circumstances such as the recent global crisis ,” said the research paper, jointly authored by Sunil Kumar and NRVVMK Rajendra Kumar of RBI’s internal debt management department.

“We have found that the level of government market borrowing does not explain the statistically significant variation in the policy operating target rate.”

Many OECD (Organisation for Economic Cooperation and Development) countries and emerging markets have separated public debt management from central bank’s operation to improve monetary policy and its impact on price stability.