Scribd Logo
Upload

Welcome to Scribd!

  • 127 views

    Masala Bonds PDF

    Uploaded by

    Binay Tripathy
    Masala Bonds are rupee-denominated bonds issued in the international capital market by the International Finance Corporation to raise funds for private sector infrastructure projects in India. They are listed on the London Stock Exchange and settled in US dollars, so investors take on currency risk. Masala Bonds are the first rupee bonds listed overseas and have a 10-year maturity. If successful, Masala Bonds could increase competition in India's domestic bond market and open new investment avenues for savers while also supporting the rupee value through higher overseas demand. However, excessive reliance on external debt through Masala Bonds could negatively impact India's credit ratings if the economy remains unstable.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Masala Bonds PDF

    Uploaded by

    Binay Tripathy
    127 views2 pages
    Masala Bonds are rupee-denominated bonds issued in the international capital market by the International Finance Corporation to raise funds for private sector infrastructure projects in India. They are listed on the London Stock Exchange and settled in US dollars, so investors take on currency risk. Masala Bonds are the first rupee bonds listed overseas and have a 10-year maturity. If successful, Masala Bonds could increase competition in India's domestic bond market and open new investment avenues for savers while also supporting the rupee value through higher overseas demand. However, excessive reliance on external debt through Masala Bonds could negatively impact India's credit ratings if the economy remains unstable.

    Original Description:

    Original Title

    Masala Bonds.pdf

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Masala Bonds are rupee-denominated bonds issued in the international capital market by the International Finance Corporation to raise funds for private sector infrastructure projects in India. They are listed on the London Stock Exchange and settled in US dollars, so investors take on currency risk. Masala Bonds are the first rupee bonds listed overseas and have a 10-year maturity. If successful, Masala Bonds could increase competition in India's domestic bond market and open new investment avenues for savers while also supporting the rupee value through higher overseas demand. However, excessive reliance on external debt through Masala Bonds could negatively impact India's credit ratings if the economy remains unstable.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    127 views2 pages

    Masala Bonds PDF

    Uploaded by

    Binay Tripathy
    Masala Bonds are rupee-denominated bonds issued in the international capital market by the International Finance Corporation to raise funds for private sector infrastructure projects in India. They are listed on the London Stock Exchange and settled in US dollars, so investors take on currency risk. Masala Bonds are the first rupee bonds listed overseas and have a 10-year maturity. If successful, Masala Bonds could increase competition in India's domestic bond market and open new investment avenues for savers while also supporting the rupee value through higher overseas demand. However, excessive reliance on external debt through Masala Bonds could negatively impact India's credit ratings if the economy remains unstable.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    PO V Interview PDF

    IBPS PO V Interview Materials


    MASALA BONDS
    "Masala Bonds" are the 10 year off-shore rupee bonds issued by International Finance
    Corporation (IFC), a member of the World Bank group, in the international capital market in
    November 2014, to raise funds for supporting private sector infrastructure development
    initiatives in India. Masala Bonds are listed in London Stock Exchange.
    Masala Bonds, like any other off-shore bonds, are intended for those foreign investors who
    want to take exposure to Indian assets, yet constrained from doing it directly in the Indian
    market or prefer to do so from their offshore locations. The settlement of the bonds will be in
    US dollars but since they are pegged to the Indian currency -rupee-, investors will directly take
    the currency risk or exchange rate risks. Settlement is done in US dollars because of the limited
    convertibility of rupee.

    Masala Bonds are the first rupee bonds listed on the London Stock Exchange. They are the
    longest-dated bonds in the offshore rupee markets, building on earlier offshore rupee issuances
    by IFC at three-, five-, and seven-year maturities. However, these earlier bond issuances were
    not issued under the nomenclature of Masala Bonds. As on date, the present issue of Masala
    Bonds is a one-time issue. Hence, subsequent issuances of the off shore rupee bonds by IFC
    may also not be under this nomenclature.

    Yet by usage of the term, Masala Bonds are similar to Dimsum bonds -bonds issued outside
    China but denominated in Chinese currency. But they are different from Samurai Bonds which
    are Yen (Japanese currency)-denominated bond issued in Tokyo by a non-Japanese company
    and subject to Japanese regulations.

    It was not due to a whim or loyalty to ones country that led to such a colourful christening for
    the local currency bonds. Masala Bonds, if they take off, can be quite a significant plus for the
    Indian economy. They are issued to foreign investors and settled in US dollars. Hence the
    currency risk lies with the investor and not the issuer, unlike external commercial borrowings
    (ECBs), where Indian companies raise money in foreign currency loans.

    While ECBs help companies take advantage of the lower interest rates in international markets,
    the cost of hedging the currency risk can be significant. If unhedged, adverse exchange rate
    movements can come back to bite the borrower. But in the case of Masala Bonds, the cost of
    borrowing can work out much lower. The RBI in its April policy said that it would issue
    guidelines for allowing corporates to issue rupee bonds in overseas markets.

    12/12/2015

    Downloaded from www.exampundit.in

    PO V Interview PDF

    Masala Bonds can have implications for the rupee, interest rates and the economy as a whole.
    Let us consider the advantages first. Competition from overseas markets may nudge the
    government and regulators to hasten the development of our domestic bond markets. A
    vibrant bond market can open up new avenues for bond investments by retail savers.
    If Masala Bonds are eagerly lapped up by overseas investors, this can help prop up the rupee.
    The rising demand for Dim-sum bonds in 2011, for instance, promoted the use of the Yuan in
    global trade and investment. Dim-sum bonds also provided investment avenues for Yuanholders outside of China. With talks of a full rupee convertibility back home, Masala Bonds can
    help the rupee go global.

    But these bonds can have bad after-effects too if companies decide to binge on them. As of
    December 2014, corporate overseas borrowings stood at $171 billion. The recent turmoil in the
    rupee is already prompting caution on existing foreign loan exposure.
    Some reports estimate that Indian corporates, are likely to issue about $6 billion worth of
    Masala Bonds this fiscal. With our economy still on shaky ground, too much reliance on
    external debt (even in rupees) can weigh heavily on our rating by global agencies.

    12/12/2015

    Downloaded from www.exampundit.in

    You might also like