Masala Bonds

Masala bonds are rupee denominated overseas bonds. Here are key notable points about Masala Bonds.

  • Such bonds are Rupee denominated. When an Indian company issues Rupee denominated Bond, it is obviously shielded against the risk of currency exchange rate aberrations. The foreign exchange risk is on foreign investors rather.
  • The key advantages of Masala Bonds are as follows: Firstly, they help to internationalize the Indian Rupee and deepen Indian Financial system. Secondly,  they diversify the funding resources of Indian companies. Thirdly, they may help to bring down the cost of borrowing and cost of capital. Fourthly, allowing Masala Bonds is considered to be a small step towards full convertibility of Rupee. Fifthly, such bonds would support towards stability of rupee.
  • First Masala Bond was issued by International Finance Corporation (IFC) in 2013. So far, no Indian company has released such Bonds.
  • The analogous bonds of China are called “Dim sum” while those of Japan are called “Samurai” bonds.
  • The Indian companies are allowed to raise a maximum of $750 million per year through masala bonds with a minimum maturity of five years.

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