The Reserve Bank of India plays a key role in managing India's public debt and government securities markets. It is responsible for issuing new rupee loans on behalf of the central and state governments, paying interest on these loans, and managing debt repayments. The RBI aims to minimize borrowing costs, reduce risks, and improve the depth and liquidity of government securities markets. Statutorily, Sections 20 and 21 of the RBI Act vest public debt management responsibilities with the RBI.

1. ROLE OF RBI IN DEBT
MANAGEMENT
OPEN ELECTIVE SUBJECT
PUBLIC FINANCE
Arushi Rajput
BBA – Banking & Finance

2. PUBLIC DEBT
• The borrowings from the security of the
Consolidated Fund by the Government of
India.
• Public debt is one of the instruments to
cover deficits in budget.
TYPES OF PUBLIC DEBT
i. External Debt
ii. Internal Debt

3. MANAGEMENT OF PUBLIC DEBT
The Reserve Bank’s
debt management
strategy aims at
minimising the cost of
borrowing, reducing
the roll-over and other
risks, smoothening the
maturity structure of
debt, and improving
depth and liquidity of
Government securities
markets by developing
an active secondary
market.
• The Reserve Bank manages public
debt on behalf of the Central and
the State Governments.
• It involves issue of new rupee loans,
payment of interest and repayment
of these loans, debt certificates and
their registration, etc.
• It is the largest single holder of
government securities
• It is entrusted with the
responsibility of imposing credit
control measures

4. INTERNAL DEBT MANAGEMENT
DEPARTMENT
• The main activity of the Department is to manage the public debt of
Government of India/ State Governments.
• The Department also regulates and supervises the Primary Dealers
System and has the responsibility for development of Government
Securities Market. These activities involve:
a) Floatation of Central/State Government Loans
b) Fixing of limits on Ways and Means advances (WMA) for both
Central and State Governments
c) Authorization, regulation and supervision of the Primary Dealer
system
d) Market development activities
e) Facilitating State Governments' investment

5. STATUTORY PROVISIONS
• In terms of Section 20 and 21 of the RBI Act, management of
the public debt of the Government of India and the issuance of
new loans is vested with the Reserve Bank of India.
• Under Section 21A of the RBI Act, the Bank may, by agreement
with the Government of any State, undertake the management
of the public debt of that State.
• Under Section 17(11) of the RBI Act, the RBI is empowered to
act as an agent of, inter alia, the Central and State Governments
in managing public debt and issuing and managing bonds and
debentures.
• The Bank is authorised to make Ways and Means advances
(WMA) to the Central and the State Governments as a banker to
them in terms of section 17(5) of the RBI Act.

6. STATUTORY PROVISIONS
• The Reserve Bank derives its regulatory power over the government
securities market from Section 16 of the Securities Contracts
(Regulation) Act (SCRA), 1956, as amended in March 2000 under
which the Government has delegated the powers exercisable by it to
the Reserve Bank. Under Section 45W of the RBI (Amendment) Act,
2006, the RBI is empowered to regulate transactions in derivatives,
money market instruments, etc. The Reserve Bank is, thus, authorised
to regulate dealings in government securities, money market securities,
gold related securities and securities derived from these securities as
also ready forward contracts in debt securities.
• The Government Securities (GS) Act, 2006 (which replaced the Public
Debt Act, 1944) and the Government Securities Regulations, 2007
empowers RBI for the issue and management of government securities