What are Masala Bonds?

Masala bonds are Indian rupee denominated bonds issued in offshore capital markets.

These are rupee-denominated bonds issued to offshore investors settled in dollars and, therefore, the currency risk resides with investors.   With Masala Bond, Indian corporates will have more option to blend their debt portfolio to optimize the liability and minimize the cost.

Further, it can be a launch pad to sell the strength of rupee to the overseas investors.   From the issuer perspective, these are rupee-denominated bonds issued to offshore investors settled in dollars and, therefore, the currency risk resides with investors.

The investor set is more broad-based than just FIIs (foreign institutional investors), as these instruments can usually be sold to other investors who prefer the fact that these are listed.   The history behind these bonds IFC issued a 10-year, 10 billion Indian rupee bond in November 2014 to increase foreign investment in India and mobilise international capital markets to support infrastructure development in the country. These will be offered and settled in US dollars to raise Indian rupees from international investors for infrastructure development in India. IFC will convert bond proceeds from dollars into rupees and use the rupees to finance private sector investment in India.   The “Masala bonds” marked the first rupee bonds listed on the London Stock Exchange. IFC named these ‘Masala’ bonds as ‘masala’ is a globally recognized term that evokes the culture and cuisine of India. This is not the first time that a

With Masala Bond, Indian corporates will have more option to blend their debt portfolio to optimize the liability and minimize the cost. Further, it can be a launch pad to sell the strength of rupee to the overseas investors.   From the issuer perspective, these are rupee-denominated bonds issued to offshore investors settled in dollars and, therefore, the currency risk resides with investors. The investor set is more broad-based than just FIIs (foreign institutional investors), as these instruments can usually be sold to other investors who prefer the fact that these are listed.   The history behind these bonds IFC issued a 10-year, 10 billion Indian rupee bond in November 2014 to increase foreign investment in India and mobilise international capital markets to support infrastructure development in the country. These will be offered and settled in US dollars to raise Indian rupees from international investors for infrastructure development in India. IFC will convert bond proceeds from dollars into rupees and use the rupees to finance private sector investment in India.   The “Masala bonds” marked the first rupee bonds listed on the London Stock Exchange. IFC named these ‘Masala’ bonds as ‘masala’ is a globally recognized term that evokes the culture and cuisine of India. This is not the first time that a bond has been named after the food or culture of a country. Chinese bonds, for example, are called Dim sum bonds, and Japanese ones as Samurai bonds.

Text compiled from State Bank of India research report called Ecowrap, Masala Bond, The Spice of India. - See more at: