What are masala bonds?
What are masala bonds?
[A]Rupee denominated domestic bonds
[B]Rupee denominated overseas bonds
[C]Dollar denominated overseas bonds
[D]Dollar denominated domestic bonds
Rupee denominated overseas bonds
Masala bonds are rupee denominated overseas bonds. Masala bonds will help to internationalise the Indian rupee and also deepen the Indian financial system. By issuing bonds in rupees, an Indian company is shielded against the risk of currency fluctuation, typically associated with borrowing in foreign currency. Besides helping diversify funding sources, the cost of borrowing could also turn out to be lower than domestic markets. In 2013, the first masala bonds were issued by the International Finance Corporation (IFC), an arm of the World Bank. IFC then named them Masala bonds to give a local flavour by calling to mind Indian culture and cuisine.