The government’s intention to set up a Public Debt Management Agency (PDMA) is not only required for the development of the bond market in the country, but it would also prevent leakages of public funds.
The Finance Minister said that one vital factor in promoting investment in India, including in the infrastructure sector, is the deepening of the Indian Bond market, which we have to bring at the “same level as our world class equity market”.
“I intend to begin this process this year by setting up a Public Debt Management Agency (PDMA) which will bring both India’s external borrowings and domestic debt under one roof.
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The Finance Minister will not be able to make this happen unless the bonds are tradable in the country. “Primarily this agency will structure the debt requirement, monitor the utilisation and the cost of the debt,” said Riaz Thingna, Partner, Walker Chandiok & Co LLC.
After this process this agency will collect and publish information of public debt. Then it will purchase and re-issue various bonds. “This agency will be further responsible to make payment of interest and repayment also to the bond holders,” Mr. Thingna added.
According to him, this would streamline the entire government debt structure. Later, the agency will be able to do the risk analysis of the debt and completely monitor the debt, its cost, its use and its repayment. Once the agency is able to structure all these, they will be able to go to the next level of free trading in these bonds like the equity market.
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Mr. Thingna added: “This is required for fiscal discipline and it is going to control the level of public debt and monitor the utilisation of debt.” At this stage how the agency will function or the powers of the agency are not defined.