New Delhi: After surrendering the power of exclusively fixing interest rates in the country, Reserve Bank of India (RBI) is losing the responsibilities of managing public debt on behalf of the Centre government.
On Wednesday, the government has set up a Public Debt Management Cell (PDMC) in budget division of the finance ministry. It will be made a statutory body, Public Debt Management Agency (PDMA) in two years.
“This interim arrangement will allow separation of debt management functions from RBI to PDMA in a gradual and seamless manner, without causing market disruptions. PDMC shall be upgraded to a statutory PDMA, in about two years,” said a finance ministry office memorandum.
The cell will advise the central bank in finalising the government’s market borrowings as well as managing its liabilities.
After this, RBI will no longer remain the banker of the government. This is being done to resolve a potential conflict of interest that RBI faces as the body responsible for setting up interest rates in the country as well as for selling and buying government bonds.
The joint secretary (budget), department of economic affairs, ministry of finance would be the overall in-charge of the PDMC. The transition process from PDMC to PDMA would be implemented by a joint implementation committee to be chaired by JS (budget), with members from the government and RBI. PDMC will be staffed by 15 experienced debt managers from budget division, RBI, current middle office and other units.
