The Union Finance Ministry has set up a Public Debt Management Cell (PDMC) with the objective of deepening bond markets in the country.
PDMC will streamline government borrowings and better cash management for deepening bond markets.
- PDMC is an interim arrangement and will be upgraded to a statutory Public Debt Management Agency (PDMA). Thus, it will requisite preparatory work for PDMA.
- It will allow separation of debt management functions from RBI to PDMA in a gradual and seamless manner, without causing market disruption.
- The Middle Office of the Budget Division in the Union Finance Ministry will be subsumed into PDMC with immediate effect.
- The Joint Secretary (Budget), Department of Economic Affairs of the Finance Ministry will be the overall in-charge of the PDMC.
- PDMC will have only advisory functions in order to avoid any conflict with the statutory functions of RBI.
Functions of PDMC
- Plan government borrowings, including market borrowings and other borrowings, like Sovereign Gold Bond (SGB) issuance.
- Manage government’s liabilities, improve cash forecasting, monitor cash balances, foster a liquid and efficient market for government securities.
- Advise government on matters related to capital market operations, investment, administration of interest rates on small savings etc.
- Develop an Integrated Debt Database System (IDMS) as a centralised data base for all liabilities of government, on a near real time basis. IDMC will be an integral part of PDMC.
- The setting up of the PDMA is top priority of government for bringing financial sector reform.
- With establishing PDMA, Government seeks to divest the RBI of its dual and often conflicting roles as the banker and manager of the Central Government’s borrowing.
- It will also facilitate in better planning and management of domestic and foreign market borrowings of Central Governemnt. It will help in strengthen bond market and help to promote investment.
- It will be in pursuance global practice of shifting public debt management from central bank to a debt management office.
Former Finance Minister Pranab Mukherjee was first announced the setting up of PDMA in Budget 2011-12. However, RBI was first to recognise the need for PDMA in its Annual Report 2000-01. It was also supported by the Financial Sector Legislative Reforms Commission (2013).