The concept of debt consolidation is one of the key points of the Government’s plan to address the debt crisis in the country.
The idea is that the public sector will take control of the banking sector to reduce the total debt of the country, by putting in place a mechanism that will keep the interest rate of the national government from rising beyond the limits imposed by the RBI.
This will mean that the interest payments to the government will be reduced as well.
The RBI would also be asked to keep a close watch on the interest-bearing liabilities of the banks to ensure that the government can cover its liabilities without going through any further difficulties.
In the process, the banking system will be restructured so that the banks will no longer need to be a part of the central bank’s balance sheet.
The Government hopes that the plan will bring down the debt to an acceptable level and will be implemented as soon as possible.
The plan is expected to be introduced in the Budget session of Parliament this year.