The government today said an independent office to manage the Centre's debt will be set up through an executive order till the time a proposed bill is passed by Parliament.
In its Mid-Year Economic Analysis presented in Parliament, Finance Ministry said it is in "consultations with the Reserve Bank of India" on setting up a Public Debt Management Agency (PDMA).
Modelled on independent public debt offices in developed economies like the US and the UK, India's separate debt management office will be charged with selling debt on behalf of the government after taking away such powers from the RBI.
The ministry has proposed to make PDMA an autonomous agency that will act as an investment banker to the government and will raise capital through bonds for the government.
It will be tasked with setting the borrowing calendar as well as deciding on maturities of securities to be issued on behalf of the government.
"Detailed road map has been prepared for establishing PDMA," the review said. "In the meantime, it is proposed to set up an executive order non-statutory PDMA."
The Ministry said draft Cabinet Note for inter- ministerial consultation has been circulated.
PDMA will resolve a conflict of interest the RBI now faces with its formal mandate to control inflation and separately having to manage the government's fundraising.
Finance Minister Arun Jaitley had proposed setting up a PDMA "which will bring both India's external borrowings and domestic debt under one roof."
There are precedences of government setting up non- statutory bodies before legislations are passed by Parliament. The Pension Fund Regulatory and Development Authority (PFRDA) was established by the Atal Bihari Vajpayee-government in 2003 through an executive order as a precursor to a statutory regulator.
PFRDA continued to be a non-statutory interim regulator for 10 years.
A non-statutory PDMA would be an interim arrangement before an independent agency is set up for managing the government borrowing programme.
At present, RBI is handling the government's borrowing programme. The setting up of PDMA would require amendments to the RBI Act.
The agency would be set up after the Cabinet approval, while a full-fledged PDMA would become operational only after amendment to the RBI Act.
