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    Question

    A SEBI-registered Infrastructure Investment Trust

    (InvIT) plans to raise funds by issuingĀ Masala BondsĀ in the London market. Which of the following regulatory combinations correctly identifies the currency risk-bearer and the minimum maturity requirements for this issuance in 2026?
    A The issuer bears the currency risk; Minimum maturity is 3 years for all issue sizes. Correct Answer Incorrect Answer
    B The investor bears the currency risk; Minimum maturity is 3 years for issues up to USD 50 million equivalent and 5 years for larger issues. Correct Answer Incorrect Answer
    C The investor bears the currency risk; Minimum maturity is 5 years irrespective of the issue size. Correct Answer Incorrect Answer
    D The issuer bears the currency risk; Minimum maturity is 7 years for infrastructure projects. Correct Answer Incorrect Answer
    E The RBI bears the currency risk; Minimum maturity is aligned with standard 10-year G-Secs. Correct Answer Incorrect Answer

    Solution

    Masala BondsĀ are rupee-denominated bonds issued in offshore markets. In addition to corporates, SEBI-regulatedĀ REITs and InvITsĀ are specifically permitted to issue these bonds. Because they are settled in foreign currency but denominated in INR, theĀ investorĀ bears the risk of rupee depreciation. As per theĀ RBI’s Master Direction on ECB, the minimum original maturity isĀ 3 yearsĀ for issuances up to USD 50 million equivalent per financial year andĀ 5 yearsĀ for issuances exceeding that amount.

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