RBI Updates 2015- Public Debt Management Agency (PDMA):
Important features of Public Debt Management Agency (PDMA)were given here below, under the RBI Updates 2015. Candidates those who are preparing for upcoming RBI Assistant Exam 2015 can use this material.
Government in talks with RBI to set up independent PDMA:
Union Finance Minister Arun Jaitley said on 22 May 2015 that the government was in consultations with the Reserve Bank of India on setting up an independentPublic Debt Management Agency (PDMA). Since the RBI has been handling public debt management, the government in consultation with the RBI will prepare a detailed roadmap separating the debt- management function and the market infrastructure from the RBI and having a unified financial market.
The idea, seen as crucial to efficient functioning of the new inflation targeting monetary policy framework, wasmooted by the RBI itself for the first time in its 2000-01 annual report.
Public Debt ManagementAgency
What it is Public Debt Management Agency (PDMA)?
PDMA is a specialized independent agency that manages the internal and external liabilities of the Central Government in a holistic manner and advises on such matters in return for a free. PDMA was proposed to be established in India through the Finance Bill, 2015. As a corollary of the decision to create a PDMA, the RBI was given the task of inflation targeting under a monetary policy framework agreement.
Status of PDMA: However, the creation of PDMA was put on hold as the proposals mentioned in the Finance Bill 2015 could not be agreed upon in the Parliament, Accordingly, Clauses relating to the PDMA, amendments to the RBI Act 1934 and the Government Securities Act 2006 were withdrawn from the Finance Bill, 2015.
Background: Genesis of the thinking on an independent debt management office is traced back to the Committee on Capital Account Convertibility (1997) and the Review Group of Standing Committee on International Financial Standards& Codes (2004). Both were in-house report from RBI.
Justice B.N. Srikrishna chaired FSLRC or Financial Sector Legislative Reforms Commission report (2013) also recommended setting up the independent Public Debt Management Agency (PDMA) at the earliest.
Expected Outcomes from PDMA: The Public Debt Management Agency (PDMA) will bring both India’s external borrowings and domestic debt under one roof and would usher in better debt management practices such as creating a “medium term debt strategy framework”, just as the case for fiscal deficit. This may also lead to gradual reduction of Statutory Liquidity Ratio (SLR) and frees up the lending space of commercial banks.
Relationship of RBI with central Government after removal of debt management functions: the Constitution of India gives the executive branch of the Government the powers to borrow upon the security of the Consolidated Fund of India. Reserve Bank as an agent of the Government (both Union and the States) implemented the borrowing program. The Reserve Bank draws the necessary statutory powers for debt management from Section 21 of the Reserve Bank of India Act, 1934.
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