CA and CS HUB: INTERVIEW - RBI TO RETAIN POWER TO REGULATE GOVERN...: Interview - RBI to retain powers to regulate government bonds - Sinha Junior Finance Minister Jayant Sinha gestures during an interview wi... My VIEW: Debt Management Agency This refers to the report “RBI to retain powers to regulate government bond, says Sinha”(April 29). Intentions behind the proposal for an independent Public Debt Management Agency ‘outside’ RBI and GOI are indeed noble. Beyond expertise, ultimately, as the agency will have to handle ‘debt’ which is dependent on credibility and clout of the borrower, for the moment, it is better to continue status quo. Every time a new initiative or decision is taken affecting financial sector, we have a legacy of vested interests trying to tilt the decision in their favour by putting a wedge between GOI and RBI. It is comforting to see that the present RBI Governor and Finance Ministry have understood the game and are working in tandem. It would be expedient to allow RBI to continue public debt management at least for another decade. Reasons galore. One, there is no retail market for government securities and therefore government borrowing is dependent on commercial banks(which are mandated to maintain a certain percentage of their assets in ‘cash, gold or unencumbered approved securities..’) and financial institutions. Two, Reserve bank of India has been managing public debt for several years well and this has helped the institution develop in-house expertise and skill which cannot be easily ‘transferred’ to a new organisation. Three, there is no guarantee that a new agency will be in apposition to function independent of GOI and RBI for reasons One and Two! As RBI Governor and Finance Minister are on the same page in regard to having an independent Public Debt Management Agency, perhaps GOI could consider setting up a statutory body to initially handle management of surplus funds and borrowings of public sector organisations, management of state government borrowings (now being handled now by RBI on an agency basis(Section 21A of RBI Act) and such other responsibilities GOI may entrust to that organisation. As the organisation grows, it can help in building a retail market for government securities and gradually relieve RBI of Public debt management responsibilities. M G Warrier, Thiruvananthapuram


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