Key Concepts & Self-Assessment15 Key Facts
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#1
Article 292 of the Constitution authorizes the Union Government to borrow upon the security of the Consolidated Fund of India.
#2
Article 293 regulates State borrowing, stipulating that a State cannot borrow externally from abroad without Union consent.
#3
Under Article 293(3), a State cannot raise any domestic loan without Central consent if an outstanding Central loan or guarantee remains unpaid.
#4
The Government Securities Act 2006 replaced the colonial Public Debt Act of 1944 to modernize the administration of government debt.
#5
The Reserve Bank of India acts as the statutory public debt manager to the Union Government under Sections 20 and 21 of the RBI Act 1934.
#6
Section 21A of the RBI Act 1934 enables State Governments to enter into formal statutory agreements with the RBI for debt management.
#7
Internal debt of the Central Government comprises more than 95 percent of India's total outstanding sovereign public debt.
#8
Treasury Bills are zero-coupon money market debt instruments issued at a discount and redeemed at par upon statutory maturity.
#9
The Government of India currently auctions Treasury Bills in three standard tenors: 91-day, 182-day, and 364-day maturities.
#10
Cash Management Bills (CMBs) were introduced in May 2010 to finance temporary cash flow mismatches with tenors under 91 days.
#11
Dated Government Securities (G-Secs) are long-term sovereign debt instruments featuring tenors extending up to 40 years.
#12
The historic agreement signed in March 1997 abolished 91-day ad-hoc Treasury Bills, permanently ending automatic monetization of deficits.
#13
Ways and Means Advances (WMA) instituted under Section 17(5) of the RBI Act provide short-term credit to bridge government cash gaps.
#14
Overdraft facilities are available to State Governments when borrowing exceeds their sanctioned WMA limits, subject to RBI operational guidelines.
#15
The Public Debt Management Agency (PDMA) was proposed by the Financial Sector Legislative Reforms Commission to separate monetary and debt management functions.
Subject Specialist Commentary
Analytical perspective & practical exam advice from the Master10 academic board
Public debt represents the total sovereign borrowing that a government raises to finance development projects and balance fiscal deficits. Under the Constitution, the Union borrows under Article 292, while States borrow under Article 293. Over 95 percent of India's public debt is raised domestically, avoiding risky foreign currency exposure. To manage short-term borrowing, the government issues zero-coupon Treasury bills at a discount, alongside long-term dated securities that can span maturities up to 40 years.
When preparing for UPSC and State PSC exams, pay special attention to the constitutional rules in Article 293. A State cannot borrow from abroad, nor can it raise domestic loans without Central consent if it has unpaid Central debts. Questions often test money market instruments: remember that standard Treasury bills mature in 91, 182, and 364 days, whereas Cash Management Bills handle cash shortages under 91 days. Never confuse temporary Ways and Means Advances with permanent deficit financing.
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