Masala bonds are those which are Rupee denominated bonds issued outside India. Such bonds will be offered to foreign investors who are interested in investment in India but without direct exposure.
These bonds are issued to raise funds in the international market. Masala bonds are listed on London Stock Exchange.
What are Masala Bonds?
IFC, a member of the World Bank, issued a 10-year, 10 billion Indian rupee bond (equivalent to $163 million) to increase foreign investment in India, mobilizing international capital markets to support infrastructure development in the country.
They are the long-dated bonds in the offshore rupee markets, building on earlier offshore rupee issuances by IFC at three-, five-, and seven-year maturities.
Proceeds from the offering will support a forthcoming infrastructure bond issuance by Axis Bank.
The settlement will be made in US dollars as they are rupee denominated, the investors are directly exposed to exchange and currency rate risk.
IFC named the bond as 'Masala' as it gives a touch of Indian culture and cuisine.
Chinese bonds are called as Dim sum bonds, and Japanese ones as Samurai bonds are other country's which named bonds after the food or culture.