Jaitley moves amendments to delete PDMA provisions in finance bill

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April 30, 2015

New Delhi: The government on Thursday withdrew a proposal to establish an independent public debt management agency (PDMA) after the Reserve Bank of India raised concerns over the move.

April 30, 2015

New Delhi: The government on Thursday withdrew a proposal to establish an independent public debt management agency (PDMA) after the Reserve Bank of India raised concerns over the move.

Jaitley said the continuation of RBI as a public debt manager creates \"a conflict of interest between RBI's role of controlling inflation and its interest in keeping interest rates low.\" Photo: PTI

Finance minister Arun Jaitley moved amendments to the finance bill 2015, deleting the provision on setting up the PDMA.

“Since the RBI has been handling public debt management, the government in consultation with the RBI will prepare a detailed roadmap separating the debt management function and the market infrastructure from the RBI and having a unified financial market,” Jaitley said in Parliament.

“It has been therefore been decided to delete the PDMA provisions from the finance bill for this financial year,” he said, but reiterated the government’s commitment to unify the financial markets.

RBI had raised concerns about a government’s proposal to take away regulation of money markets away from the central bank and shift it to capital markets regulator Securities and Exchange Board of India.

Justifying the government’s decision to separate the debt management function from RBI, Jaitley said the continuation of RBI as a public debt manager creates “a conflict of interest between RBI’s role of controlling inflation as now enshrined in the monetary policy agreement and its interest in keeping interest rates low to reduce the cost of borrowings” for the government.

In addition, it perpetuates a conflict of interest within the RBI from being a regulator of government securities and simultaneously both being a trader in government securities as well as owning both the exchange in which government orders are matched and the depositories of government securities, he said.

Jaitley also pointed out that having an independent debt management office is also the best international practice, citing the examples of the US and the UK.


Courtesy: PTI

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