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Foreign investors start buying India's state debt

Raghuram Rajan, Governor of the Reserve Bank of India (RBI), speaks during a press conference in Mumbai, India, Sept 29, 2015.

[MUMBAI] Foreign investors started buying India's state bonds on Monday for the first time after the central bank said last month it would allow up to 500 billion rupees (US$7.72 billion) in staggered investments until March 2018.

The first bond bought was 1 billion rupees worth of 8.28 per cent 2025 Maharashtra bond at a yield of 7.93 per cent, according to the Clearing Corporation of India Ltd data.

The state debt will be sold on an on-tap basis with foreign investors allowed to buy up to 35 billion rupees until January in the first stage of the process.

India's states are gearing up to sell debt to foreign investors for the first time, stepping up competition for funds that could force the country's spendthrift provinces to clean up their books and tighten spending controls.