RBI worries about foreign surge into Treasury-bills

Reuters Posted: Jan 29, 2013 at 1059 hrs
* RBI says most of the recent foreign fund investment into debt has gone into treasury bills, providing little comfort towards a sustainable path in bridging the current account deficit, according to its macro-economic report on Monday.

* India\'s ratio of short-term debt on a residual maturity basis to total debt rose to 43.7 percent as of the end of September 2012 versus 42.9 percent in the previous quarter, according to the report.

* The comments are in line with the RBI\'s known discomfort about using debt inflows to plug the current account deficit, even as the government looks to boost more foreign investments.

* India recently hiked the debt limit for foreigners in government and corporate bonds by $5 billion each taking the total limit for domestic debt to $75 billion.

* \"While the increased limit may enhance debt inflows, they do not provide a solution to current account deficit financing on a sustainable basis,\" says RBI\'s macro report.

* RBI has disallowed investment by foreigners in short-term papers like t-bills for upto $15 billion of the FII limit in government bonds, in a recent decision.