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PDMA should be independent of govt and RBI, says Raghuram Rajan

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Raghuram RajanReserve Bank of India Governor Raghuram Rajan

New Delhi: Public Debt Management Agency (PDMA) should be independent of the government as well as the central bank for ensuring fiscal discipline, RBI Governor Raghuram Rajan said today. “Public debt management agency as a professional organisation, independent of the central bank and government, that is something that is desirable,” he said here. Rajan was speaking to media after Finance Minister Arun Jaitley’s address to the RBI board. “Because it puts some discipline on the government debt process and also frees regulation of the need to create some sort of financial impression,” he said.

Public debt is currently management by the Reserve Bank of India (RBI). 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. The agency will have a CEO and members from the government and RBI. Rajan further said, “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.” 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.