RBI cautious about raising foreign cap on rupee bond holdings

Mumbai

WHILE India's central bank has good reasons to raise the cap on global funds' rupee bond holdings, one glance at Asian currency markets explains why it probably won't.

Schroder Investment Management Ltd says raising the US$30 billion limit on sovereign debt holdings will help central bank governor Raghuram Rajan achieve a goal of transmitting his three benchmark interest rate cuts to the real economy.

Last week's devaluation of the yuan, a plunge in the Malaysian ringgit to a 1998 low and the prospect of rate increases by the US Federal Reserve will only reinforce his caution.

"He's told us many times that he's worried not too much about inflows but with the reversal…