Features of Masala Bonds
- Masala Bonds are issued directly in Indian rupees, the exchange rate risks fall on the shoulders of the investors. The issuer of masala bonds is unaffected by a decline in rupee exchange rates.
- Bonds issued up to the rupee equivalent of $50 million are said to have a three-year maturity period, whereas bonds issued in excess of 50 million US dollars should mature in 5 years, citing the RBI.
- Numerous Indian investors, including HDFC, NTP, Indiabulls Housing, etc., have used them to raise money.
- These bonds are converted at market value on the day the transactions are settled.
- Countries that are members of the Financial Action Task Force (FATF) and the International Organization of Securities Commissions are eligible to issue masala bonds.
- India is a member of several regional and international financial organizations. Members of these organizations may also purchase these bonds.
- In November 2014, the International Finance Corporation (IFC), the World Bank’s investment arm, issued bonds with a maturity date of 10 years and a face value of 10 billion Indian rupees in an effort to attract more foreign capital to India and to help it expand its infrastructure.
- The Asian Development Bank sold 10-year Masala Bonds worth Rs 850 crore on India INX’s global debt listing platform in February 2020 and this was done to promote the Indian rupee and investment.
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.