The Government of India's presence in the London capital market was not limited to the issue of loans. The IO had some involvement in the flotation of the securities of the purchased guaranteed railway companies, and sold sterling bills, short-term investments with lives of between three to twelve months. There was also at any one time a considerable holding in Britain of Indian rupee stock, and, in 1917/18, the Indian government floated a large rupee war loan, the proceeds of which were used to take over a proportion of the 5 per cent British war loan 1929–47.

The issue of guaranteed railway company debentures

The IO could raise the money required by the purchased guaranteed railway companies through the issue of government loans or the flotation of railway company debentures. Unless the yield for a railway flotation was expected to be high, it preferred to adopt the latter option, and, from 1879/80 to 1923/4, when the companies were nationalised, £217.2m of railway debentures were floated on the London market (Figure 2). The use of railway debentures allowed more money to be raised, as no Parliamentary sanction was needed; the interest payments were not included in the home charges; and, as the loans were not counted as Indian government liabilities and investors did not connect them to the government, they had no impact on Indian credit.