RBI's Rajan: To open debt market to short term foreign investors in "measured way"

COLOMBO (Reuters) - India will open up its debt markets to short-term foreign investors in a measured way but wants to first build liquidity through long term foreign investments to withstand potential sharp volatilities, Reserve Bank of India Governor Raghuram Rajan said on Thursday.

"We will do it carefully, we will do it in a measured way. In general, the movement is towards more liberalisation rather than away from liberalisation. But we have to do it our own pace," Rajan said at an event, referring to the opening up Indian debt markets to more short-term foreign investors.

India allowed foreign fund managers to hold more government bonds, but also stipulated that they will not be able to hold debt of less than three years, while keeping its overall debt ceiling for all foreign institutional investors intact.

(Reporting by Shihar Aneez and Ranga Sirilal, writing by Suvashree Dey Choudhury in Mumbai; Editing by Rafael Nam)