What are Masala bonds?
The Masala bonds are the bonds issued outside India but denominated in Indian rupees. They are also known as rupee bonds.
When bonds are issued outside India, it is usually denominated in US dollars or other foreign currency.
But, Masala bonds are denominated in Indian rupees and not US dollars or the local currency.
The term ‘Masala bond’ was coined by International Finance Corporation, the investment arm of World Bank.
The word Masala means ‘spices’. There are similar colourful names for bonds issued by other countries as well- Dim-sum bonds (China), Samurai bonds (Japan), Yankee (USA), bull-dog (UK)
What are the benefits of these bonds?
- Indian entities issue Masala bond as they can borrow money at a lower rate of interest than in India. Also, they do not have to bear the risk of exchange rate fluctuations.
- Foreign investors buy Masala bonds because it offers higher returns compared to the US and Europe.
Who issued the first Masala bond?
International Finance Cooperation in November 2014. It issued Rs. 1,000 crore bond to fund infrastructure projects in India. These bonds were listed on the London stock exchange.
In July 2016 HDFC became the first Indian company to issue masala bond.
What is green masala bond?
The money raised through these green bonds are used to address climate change issues.
International Financial Corporation issued the first green masala bond in August 2015.
In August 2016, Public sector unit NTPC became the first Indian company to issue green masala bond.
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