The finance department, according to official sources, may shortly give a final shape to the proposal to separate the public debt management from the RBI. It will require a change in its act but the department is not averse to the proposal.
Rajan was one of the top officials who was not very much in favour of curtaining the areas of its operations. After his exit the proposal has gained ground. The idea was mooted by finance minister Arun Jaitley last year itself and it had a mention in his budget proposals for the current financial year.
But the proposal was virtually kept in a cold storage due to opposition by Raghuram Rajan and some of his juniors. Now it appears that it will soon see the light of the day. It also lends credence to the belief that all was not well with Rajan and the government at the Centre.
Currently, government debt and liabilities are being managed by Public Debt Management Cell ( PDMC) which is a window of the Bank. After the amendment in its Act it will become a separate entity either as a new department or a body.
The development follows cut in the lending rate effected on Tuesday last. During the last six months of Raghuram Rajan's tenure as governor the rate had remained unchanged. The reason was his priority to control inflation. The new governor Urjit Patel is also labelled as a inflation hawk but he went for the cut by quarter to a percentage point.
By this cut the lending rate has come down by 1.5 per cent since 2010. Other rates have, however, remained unchanged.