Explanation:

The Centre has finally made up its mind on setting up an independent agency to mange its debt after years of discussions with the Reserve Bank of India. As a precursor, the Finance Ministry will soon set up the Public Debt Management Cell (PDMC) in the Budget Division.

“This interim arrangement will allow separation of debt management functions from RBI to the Public Debt Management Agency (PDMA) in a gradual and seamless manner, without causing market disruptions,” said the Ministry, adding that the cell will be converted to a statutory authority in about two years’ time.

The setting up of the PDMA has been a top priority for the government and a pending financial sector reform, as it would help divest the RBI of its dual and often conflicting roles as the banker and manager of the Centre’s borrowing.

According to the Finance Ministry, the PDMC will at present only have advisory functions to avoid “any conflict” with the statutory powers of the RBI. To start with, it would plan the borrowings of the Centre, manage the Central government liabilities and monitor the cash balances.

It would also develop an integrated debt database system as a centralised data base for all liabilities of the government on a near real time basis.