The proposed separate public debt management agency would compromise the effectiveness of the Reserve Bank actions in managing market volatility and the market expectations arising out of government borrowings, according to ex-deputy governor Shyamala Gopinath.
?The concern is that even after the separation of debt management, RBI would continue to be expected to manage the market volatility and market expectations arising out of government borrowings. The effectiveness of RBI actions in that scenario would obviously be compromised,? Gopinath told PTI in an exclusive interview on the eve of her retirement from the Mint Road office after 39 years of service.
She was answering to a question on how the government proposal to set up a separate entity to manage its market borrowing programme will impact the RBI autonomy.
?Management of public debt, in my view, has to be seen as part of a broader macroeconomic management framework, particularly when huge government borrowing has a predominant impact on the markets. It is in this context that the necessity of central bank involvement becomes evident.
?Only central banks have the requisite market pulse and instruments to aid in making contextual judgements which an independent debt agency, driven by narrow objectives, may not be able to do,? Gopinath asserted.
The Centre is in the process of setting up of an independent debt management office, aimed at separating RBI?s role as the decider of interest rate in the market, and at the same time being the banker to the government. at present, both the government?s debt and fresh borrowings are managed by RBI.
Finance Minister Pranab Mukherjee in his 2011-12 Budget speech had said he proposed to introduce a public debt management agency bill in the next financial year.
Hailing from Karnataka, Gopinath was in-charge of the departments of internal debt management, foreign exchange, government and bank accounts, non-banking supervision, external investments and operations, financial markets, communication and legal, at the time of hanging up her boots. She was appointed deputy governor on September 20, 2004 for a five-year tenure which was extended by two years.
On how autonomous the RBI is, she said, ?I think our institutions are very strong. Our institutional framework is very insulated from any unnecessary interference. This is particularly true in regard to the RBI.
?Our regulatory institutions have achieved a level of maturity and prominence and the people at their helm are really good statesmen and are highly experienced professionals,? she said.
Asked how it will continue to remain insulated with the super regulator FSDC (Financial Stability and Development Council) coming in play, Gopinath said, ?the Finance Minister has assured on several occasions that FSDC will in no way prejudice the autonomy of regulators. ?The FSDC has already met twice and there has been no occasion to apprehend any whittling down of regulatory functioning.?
<a href="http://www.moneycontrol.com/news/business/public-debt-mgmt-body-will-compromise-rbi-efforts-gopinath_559107.htmltag:news.google.com,2005:cluster=http://www.moneycontrol.com/news/business/public-debt-mgmt-body-will-compromise-rbi-efforts-gopinath_559107.htmlTue, 21 Jun 2011 17:03:54 GMT 00:00?>Public debt mgmt body will compromise RBI efforts: Gopinath
Source: http://www.twittertrendtopics.com/public-debt-mgmt-body-will-compromise-rbi-efforts-gopinath
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