Saturday, 1 August 2015

Masala Bonds

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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