An enabling proposal to delink the function of debt management of the Government from the Reserve Bank has been made in the RBI (Amendment) Bill 2001. The Government has also decided, in principle, to delink these functions.
And, crucially, it will reduce the ability of the banking system to deal with any future macroeconomic downturn and the accompanying deterioration in asset quality. Put simply, this means the banking system is more likely to be impaired in times of stress and less capable of supplying credit to households and businesses.