Rajan for independent public debt management agency

Reserve Bank of India Governor Raghuram Rajan on Sunday advocated keeping the proposed public debt agency independent of the government as well as the RBI 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 told reporters here after Finance Minister Arun Jaitley's post-Budget address to the RBI board.

Such an independent structure, Rajan said, "puts some discipline on the government debt process and also frees regulation of the need to create some sort of financial impression".

The RBI currently oversees public debt management.

Jaitley, in his first full budget last month, proposed setting up of a PDMA with the aim 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 Budget 2015-16 proposal, 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.

Lauding the move, Rajan said: "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.453,000 crore in the current fiscal.

For 2015-16, the budgeted target for borrowing in current fiscal was Rs.600,000 crore, but the government will raise only Rs.592,000 crore from the markets.