Masala Bonds

  • The Masala bond refers to a rupee-denominated bond through which Indian entities can raise money from foreign markets in rupee, and not in foreign currency
  • Bonds are instruments of debt that are typically used by corporates to raise money from investors
  • By issuing bonds in rupees, an Indian entity is protected against the risk of currency fluctuation, typically associated with borrowing in foreign currency
  • Masala bonds also help in internationalization of the rupee and in expansion of the Indian bond markets. These bonds are usually traded on a foreign exchange like the LSE and not in India.
  • Why in new?
      • HDFC became first Indian company to issue masala bonds.
      • The Reserve Bank of India (RBI) has increased corporate bond investment limit for foreign investors by taking out Masala bonds (rupee-denominated bonds) from ambit of total debt investment limit.

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