Mumbai : Reserve Bank Governor Raghuram Rajan said India will not give up all limits on FII investments in bonds as a precondition for inclusion in global indices for bonds.
The major indices of the world are insisting that India lift caps on foreign institutional money inflows before admitting the country, Rajan said, adding that talks in this regard were still on.
“I think the indices want for the most part a complete elimination of limits on government securities holdings by international investors,” he said, adding that such a condition cannot be met by the country.
“Until we see through the process of unwinding of this quantitative easing as well as the beginning of interest rate tightening cycle (in the developed world), it would be premature for us to completely abandon all limits,” he said, adding that any such move will be “irresponsible”.
Rajan pointed out the recent decision to increase the FII play in country’s debt markets by $5 billion to $25 billion, after the investments were closing in to breach the $20 billion cap.
Meanwhile, Raghuram Rajan also said that global markets are at risk of a “crash” if investors start bailing out of risky assets created by the loose monetary policies of developed economies.