Characteristics of Masala Bonds
Eligibility:
Masala Bonds can only be issued to the countries, and a resident of that country must subscribe to them:
- Only citizens of those nations that are members of the Financial Action Task Force may get these bonds (FATF)
- Additionally, the nation’s security market regulator must belong to the International Organization of Securities Commission.
- Additionally, these bonds may be purchased by members of regional and international financial organisations that include India.
- Several Indian companies have raised money by selling masala bonds, including HDFC, NTPC, and Indiabulls Housing Finance.
Maturity Period:
- For bonds issued up to 50 million US dollars’ worth in Indian rupees per fiscal year, the original maturity period should be at least three years.
- For bonds raised exceeding 50 million US Dollars equivalent to Indian Rupees per fiscal year, the initial maturity period must be at least five years.
Masala Bonds: Benefits, Features & Significance
Masala Bonds are debt instruments that are used to attract capital from international investors in the form of local currency. These are issued outside of India by an Indian entity as rupee-denominated bonds. These Bonds’ main purpose is to finance infrastructure projects, spur domestic growth through borrowing, and internationalize the Indian rupee. Given that the word “Masala” in Hindi refers to spices, the intention behind these was to promote Indian culture on a global scale. International Finance Corporation (IFC) issued the first Masala bond for Indian infrastructure projects in 2014. Also, Kerala became the first Indian state to issue Masala Bonds for Rs. 2,150 crores on the London Stock Exchange in 2019.