The finance ministry has for the time being put on the backburner a proposal to set up an independent office to manage the Centre's debt.
It first would have to decide on the fate of the staff working in the Reserve Bank of India (RBI)'s debt management department before setting up a public debt management agency (PDMA).
"We will take a call on setting up of PDMA at a more appropriate time after deciding on what to do with the staff of RBI's front and back office. We will move Cabinet only after that," a senior finance ministry official told PTI.
PDMA was proposed to be set up as an autonomous agency that will act as an investment banker to the government and will raise capital through bonds for the government.
At present, RBI handles the government's borrowing programme. The RBI Act would have to be amended to set up a PDMA.
RBI manages the public debt of the central and state governments through the internal debt management department (IDMD).
The department also regulates and supervises the primary dealers system and is responsible for developing the government securities (G-secs) market.
Currently, RBI fully handles issuance (front-office) and infrastructure (back-office) of G-secs. The middle office, which is currently with the finance ministry, handles the formulation of a long-term debt management strategy, annual debt issuance and periodic calendars of borrowing, forecasting cash and borrowing requirements. It also lays down a comprehensive risk management framework.
"Ideally speaking, there has to be a debt management office separate from the regulator. But whether we should go for it in the present form and shape is a matter for debate," the official said. RBI has so far been managing debt at an arm's length distance and conflict of interest was being handled by them for so many years, he added.
Finance Minister Arun Jaitley had in Budget 2015-16 proposed setting up a PDMA "which will bring both India's external borrowings and domestic debt under one roof". However, later, he dropped the proposal from the Finance Bill-2015. The minister, however, had said the government, in consultation with the Reserve Bank, would prepare a road map to pursue a separate debt management agency later, in line with global practices.
In its Mid-Year Economic Analysis, the ministry said a PDMA to manage the Centre's debt would be set up through an executive order till the time a proposed Bill was passed by Parliament.
Modelled on independent public debt offices in developed economies like the US and the UK, the debt management office will be entrusted with selling debt on behalf of the government after taking away such powers from RBI. PDMA will be tasked with setting the borrowing calendar as well as deciding on maturities of securities to be issued on behalf of the government.