Government of India Volume I: Analysis and Recommendations

PUBLIC DEBT MANAGEMENT
Table of Recommendations 12.5 Functions of the public debt management agency
1. Managing public debt:
◮ The public debt management agency must design and recommend an annual calendar for the Central
Government to manage its public debt;
◮ The calendar will advise on all aspects of the composition of the borrowing and repayment of public
debt;
◮ This must be designed in consultation with Central Government and other key stake-holders;
◮ The public debt management agency will eventually act on instructions received from the Central Government,
but they must be empowered to make recommendations, even on a daily basis, if necessary;
and
◮ To ensure that there is an integrated approach to debt management, the public debt management
agency must also manage the external debt for the Central Government.
2. Cash management:
◮ The public debt management agency must co-ordinate with the departments, ministries and agencies
of the Central Government and RBI to estimate, monitor and manage daily cash balances. It must
advise Government on measures to promote efficient cash management practices and to deal with
surpluses and deficits.
3. Contingent liabilities:
◮ The public debt management agency must manage and execute implicit and explicit contingent liabilities;
◮ It must evaluate the potential risk of these contingent liabilities and advise the Central Government
on charging appropriate fees; and
◮ The Central Government must seek the public debt management agency’s advice before issuing any
fresh guarantees since this affects the overall stability of the public debt portfolio.
4. Research and information: The public debt management agency must have a view of the entire liability structure
of the Central Government. Accordingly, it must develop, maintain and manage information systems;
disseminate information and data; and conduct and foster research relating to its functions.
5. Fostering the market for Government securities: A liquid and efficient Government bond market enables lowcost
financing in the long run. Hence, the public debt management agency must take steps to foster a liquid
and efficient market for Government securities, including advising the regulators and the Central Government
on the policy and design of the market. In this role, the public debt management agency must work towards:
◮ Growth and diversity in investors and intermediaries;
◮ Fairplay;
◮ Competition in intermediation;
◮ Cost-minimising mechanisms for issuance and trading; and
◮ Measurement of liquidity and market efficiency, and presentation of an annual report on the progress
of the Government of India sovereign bond market.
of States, public accounts of States, Contingency Funds of States and any additional explicit
or implicit guarantees and contingent liabilities not covered in these accounts.
The public debt management agency must, therefore, develop, maintain and manage
information systems, disseminate information and data. It must release comprehensive
transaction-level data, and actively foster academic research in the public domain.
Beyond merely collating and disseminating data, the public debt management agency
must identify gaps in existing sources of data and work with public and private institutions
to fill them. Where necessary and relevant, it must synthesise data for market participants.
The public debt management agency must also regularly collect and disseminate
data and information on its own performance and operations.
12.3.5. Fostering the market for Government securities
Fostering a liquid and efficient market for Government securities should be an integral
function of the public debt management agency given the importance of a well functioning
securities market in carrying out its primary functions of debt and cash management.
This becomes all the more important as the market for Government securities has not as
yet substantially developed in India.
The function of developing the Government securities market should not be con-
FINANCIAL SECTOR LEGISLATIVE REFORMS COMMISSION 117