Why in news?
International Finance Corp. (IFC), an investment arm of the World Bank, has issued a 10-year, Rs.1,000-crore bond in London to fund infrastructure projects in India. These bonds, which will be listed on the London Stock Exchange (LSE), are called masala bonds.
WHAT ARE MASALA BONDS?
- Indian rupee denominated bonds
- issued in offshore capital markets.
- These will be offered and settled in US dollars
- to raise Indian rupees
- from international investors
- for infrastructure development in India.
- Role of IFC:
- convert bond proceeds from dollars --> rupees and use the rupees to finance private sector investment in India..
WHAT DOES THE ISSUE MEAN?
- give countries like India a chance to tap global investors for funding investment needs.
- are a boost for Indian rupee-denominated issuances as listing on LSE will provide visibility, and set a benchmark for yields in future issuances.
- could also increase demand for similar products later as liquidity of these bonds goes up.
- also shows the confidence of international investors in the Indian economy and its currency.
[Ref: Livemint]
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