New Delhi: Buying peace with RBI, the government on Thursday dropped plans for the time being to strip the central bank of powers to regulate government bonds and give it to an independent agency.
Finance Minister Arun Jaitley withdrew the proposal from Finance Bill, 2015, and said the government, in consultation with the Reserve Bank, will prepare a roadmap to pursue a separate debt management agency later in line with the global practice.
"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," Jaitley said.
He made these remarks while initiating the debate on the Finance Bill in the Lok Sabha. The House is expected to approve the Bill later in the day, giving effect to the tax proposals.
In his first full year Budget, Jaitley had proposed to set up a PDMA and shift the regulation of government bonds from RBI to market regulator Securities and Exchange Board of India (SEBI). The proposal generated lot of controversy, with the RBI raising concerns and questioning the timing of the move.
"It is being decided to delete the PDMA provisions from the Finance Bill for this financial year," Jaitley said.
While RBI Governor Raghuram Rajan had publicly not criticised the government move, Deputy Governor SS Mundra had last month called for examination of all related issues before the new agency takes shape.
"Concern was expressed I think, the (RBI) Governor had told about it that the timing (of issuance of G-Secs) and all related issues need to be examined. That's the only thing. Ultimately, there are reflections, implications of both of these things on the monetary policy," Mundra had said.
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