Moving ahead with its plan for an independent debt management office, the finance ministry is expected to first set up an interim office that would decide the modalities of the agency.
“An interim arrangement for the DMO along with the appointment of a officer on special duty has been cleared by the finance minister,” said a senior official, adding that the proposal will be taken up to the Union Cabinet soon.
The officer-on-special duty (OSD) will be in-charge of setting up the office of the debt management agency and staffing it with professionals to manage government borrowing, said the official. The agency is likely to start operations by the end of the fiscal and would initially concentrate on managing central government borrowings.
The government is also looking into the possibility of setting up the agency through an executive order as the necessary legislation is yet to be enacted by Parliament.
“It is an option but things will only start moving once the interim arrangement is put into place,” said the official.
Such a plan was also adopted for setting up the Pension Fund Regulatory and Development Authority which was originally established through an executive order and was finally given legislative backing in 2013.
Former finance minister P Chidambaram in the Interim Budget had proposed setting up a non-statutory debt management office in FY15.
“The government is ready with the Public Debt Management Agency Bill,” he had also announced.
The Reserve Bank of India has also become less critical of setting up an independent DMO, which would divest it of its responsibility to manage government borrowings.
“The DMO would allow the central bank to focus on its core responsibilities of monetary policy and currency management,” said another official.
At present, much of the RBI’s energies are focussed on managing government borrowings that are estimated at Rs 5.97 lakh crore in FY15.
As a pre-cursor to the DMO, the finance ministry had set up the Middle Office in September 2008, which formulates strategies for annual debt issuance and long term debt management.