No rift with government over public debt agency: RBI

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Mumbai: Reserve Bank of India (RBI) deputy governor S.S. Mundra on Monday said there were no differences with the government over setting up an agency for raising public debt.

Finance Minister Arun Jaitley had on Sunday denied any rift with RBI governor Raghuram Rajan on this issue.

“We have been telling there are no differences. Where is the question of sorting out,” Mundra told reporters here when asked if all the differences between the government and the RBI on setting up of a Public Debt Management Agency (PDMA) have been sorted out.

“There is no disconnect,” Jaitley had told reporters in New Delhi after addressing the Reserve Bank’s board of directors on Sunday.

Rajan on Sunday advocated keeping the proposed public debt agency independent of the government as well as the RBI to ensure fiscal discipline.

“Public Debt Management Agency as a professional organisation, independent of the central bank and government, is something that is desirable,” he told reporters.

Rajan said: “Such an independent structure puts some discipline on the government debt process and also frees regulation of the need to create some sort of financial impression”.

The RBI currently oversees public debt management.

Jaitley, in his first full budget last month, proposed setting up of a PDMA with the aim 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.

As per the Budget 2015-16 proposal, the new agency will have a CEO and members from the government and the RBI.

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.

Lauding the move, Rajan said: “So I think as a concept and enabling that concept is a very worthwhile move.”

The government’s net borrowings through long-term bonds were pegged at Rs.453,000 crore in the current fiscal.

For 2015-16, the budgeted target for borrowings was Rs.600,000 crore, but the government will raise only Rs.592,000 crore from the markets.

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