Masala Bonds enter the overseas market
Q. What is the term for rupee dominated bonds issued to international buyers?- Published on 30 Nov 15a. Masala bonds
b. Green bonds
c. Gold bonds
d. Convertible bonds
ANSWER: Masala bonds
Bonds are debt instruments used for raising money from investors. Prior to the advent of masala bonds, corporates have to rely on avenues such as ECB. Masala bonds are rupee denominated bonds issued to international buyers. In the case of masala bond, corporate could issue INR 10 billion worth of bonds while paying back INR 11 billion in one year. As the Indian rupee will have limited convertibility, investors will lend dollar equivalent of INR 10 billion. Indian corporate then needs to pay back dollar equivalent of INR 11 billion with the currency risk being with the investor. International Finance Corporation, investment arm of WB issued a INR 1000 crore bond in November 2014 which earned the name masala bond to account for the Indian angle. Chinese yuan denominated Dim Sum Bonds are also there as are Japanese yen dominated bonds called Samurai.
