As a new agency takes shape for taking over public debt management role from RBI, Governor Raghuram Rajan today favoured keeping this entity independent of the government as well as the central bank to ensure fiscal discipline.
"Public Debt Management Agency as a professional organisation, independent of the central bank and government, ... Is something that is desirable," he said here.
Speaking to media after Finance Minister Arun Jaitley's post-Budget address to the RBI board, Rajan said such a structure "puts some discipline on the government debt process and also frees regulation of the need to create some sort of financial impression."
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Public debt management currently comes under the purview of the Reserve Bank of India (RBI), while there have been reports that the RBI was not happy with the proposal to strip it off powers to manage the public debt.
Jaitley, however, scotched these murmurs and said there was no "disconnect" between the government and the RBI.
Rajan said that the "precise time, nature of resources it uses, how it works with the central bank and government -- these are all details that a panel is working to fill it out.
"These are things which are to be determined. So I think as a concept and enabling that concept is a very worthwhile move."
The government's net borrowing through long term bonds were pegged at Rs 4.53 lakh crore in current fiscal.
For 2015-16, the budgeted target for borrowing in current fiscal was Rs 6 lakh crore, but the government will raise only Rs 5.92 lakh crore from the markets.
The Budget 2015-16 has proposed setting up of PDMA with the objective of minimising the cost of raising and servicing public debt over the long term within an acceptable level of risk at all times, under the general superintendence of the Central Government.
As per the proposal made in the Budget, the new agency will have a CEO and members from the government and RBI.
As per the Finance Bill 2015-16, the central government will entrust the PDMA with the issue of Government securities including short term papers.
The agency will be responsible for making payments to holders of Government securities, in accordance with the terms of such government securities, it said.
On the Monetary Policy Framework Agreement guidelines, Rajan said these "are already out."
"Committee is in the process of discussion," he said, adding "much of what we need to do is already out there."
"There is an explicit framework. There is an explicit set of instructions as to what what happens if we violate the framework etc," he said.
"Over time, as the Finance Minister said, we will figure out the details of the committee," the RBI Governor said.
On the number of members in monetary policy committee, he said those are issues to be determined.
