Finance ministry to manage government debt, not RBI

The finance ministry plans to table a bill in the budget session to take over the management of government debt from the Reserve Bank of India (RBI).

The bill would mark a step towards public debt management reforms, as it seeks to shift the task of managing government debt from RBI to an office in the ministry, in a bid to avoid conflict of interest in the central bank's role. The Public Debt Management Agency of India Bill envisages setting up of an independent Debt Management Office (DMO) in the ministry.

''It was proposed to bring the legislation in the ensuing Budget session for 2012-13,'' a status report on government debt released yesterday said.

Finance minister Pranab Mukherjee, in his budget speech of 2011-12, had proposed the bill's introduction this financial year.

Currently, public debt, including market borrowings, is under the RBI. According to the finance ministry, it had led to conflict of interest as RBI was the monetary authority, which was instrumental in determination of interest rates in the market, as also the banker to the government.

According to the report, the centre's liabilities had been estimated at 44.2 per cent of gross domestic product (GDP) at the close of the financial year. However, these being budget estimates, the government's market borrowings had escalated by over Rs90,000 crore or over 20 per cent of the budget estimates of Rs4,17,000 crore.