RBI Permits Multilateral Financial Institutions to Invest in Masala Bonds

RBI Permits Multilateral Financial Institutions to Invest in Masala Bonds

The Reserve Bank of India (RBI) has permitted (अनुमति है) Multilateral Financial Institutions (FIs) to invest in rupee denominated (में नामित) bonds commonly known as ‘Masala Bonds’ issued by Indian entities. As per the notification by RBI on February 16, 2017, the move will enable the Indian entities

issuing rupee denominated bonds abroad (विदेश में) to have wider choice of investors.The Multilateral and Regional Financial Institutions where India is a member country can only invest in the rupee denominated bonds for example Asian Development Bank, BRICS led New Development Bank etc.

Masala Bond

 Masala bonds are the new type of rupee dominated bonds which are issued by Indian entities (संस्थाओं) in offshore market (अपतटीय बाजार) to raise funds in terms of Indian rupee only. The major benefit of this bond is that there is no currency risk. 

 These bonds are traded on London Stock Exchange instead of being traded in India.

 International Finance Corporation (IFC), a World Bank Group, issued the first masala bonds in London in November 2014 to attract international investment for infrastructure in India.