PDMA to replace RBI as Natl. debt manager by Q4’18

The Dollar Business Bureau

The Finance ministry led Public Debt Management Agency (PDMA) is likely to replace the Reserve Bank of India (RBI) as the national debt-manager by Q4 2018, according to news reports. The new agency will consolidate major debt-management functions of the government’s borrowing and debt programs, and more importantly eliminate the ‘conflict of interest issues’ arising from RBI’s (the current manager) regulatory tasks such setting up of monetary policies and interest rates.

Among its major responsibilities, the PDMA would manage the Union and State’ governments and market borrowings, and involve in the issuance of sovereign gold bonds. The agency would also maintain a database of cash balances, forecast cash and foster liquidity and an efficient market for government securities and liabilities. Last year, the government had set up a Public Debt Management cell (PDMC) at the RBI’s Delhi office, to empower it with advisory functions to avoid conflicts with the statutory functions of RBI.

The role of a PDMA was first mooted by an internal working group report on debt management chaired by Dr. Jehangir Aziz, then principal economic adviser in 2008. According to the report, many emerging economies entrusted public debt management profiles to an internal department rather than a reserve or a federal bank citing biases and conflicts of interests. The report cites examples such as Mexico, Portugal, and Brazil.

The PDMA was formally announced by Pranab Muherjee, the then Finance Minister in the 2011 finance budget. The then FM also proposed to introduce a PDMA of India bill. But by 2015, the Finance ministry introduced amends with the Government Securities Act and the RBI act through a Finance Bill to bring external borrowings and domestic debts under a common platform. In his February 2015 Budget speech, Finance Minister Arun Jaitley had proposed that the PDMA would infuse Indian Bond markets with fresh investments.