RBI Governor Rajan says no reason for India govt to sell dollar bonds

LONDON (Reuters) - There is "absolutely no reason" for the Indian government to borrow in dollars and the rest of the developing world must be careful not to become too reliant on foreign capital, Reserve Bank of India Governor Raghuram Rajan said on Friday.

"I see no reason for the sovereign to issue dollar bonds across the world," said Rajan, speaking at an event at the Chicago Booth business school in London.

"When India can borrow freely and long-term in domestic currency, there is absolutely no reason for it to go out and start a dollar borrowing programme...We will continue to borrow locally."

He said many developing countries had already started feeling the consequences of too much borrowing in hard currency.

"The lesson for all of us is make sure you get fundamentals right and don't get too reliant on foreign capital... it's not something critical to (India's) development," he added.

Rajan also said foreign investors would continue to get more access to Indian rupee bond markets.

"We have been increasing that (quota) every six months and as we feel more confident about the pace of the economy and the prospects for the global economy and no surprises, we will look at that."

(Reporting by Sujata Rao and Claire Milhench, editing by Karin Strohecker)