Question

    What is a Masala Bond?

    A Bonds issues with spices being the underlying asset Correct Answer Incorrect Answer
    B Bonds used by spice traders of India Correct Answer Incorrect Answer
    C Bonds issued by Government of India Correct Answer Incorrect Answer
    D Bonds issues outside India in US dollar Correct Answer Incorrect Answer
    E Bonds issued outside India in rupee denomination Correct Answer Incorrect Answer

    Solution

    Masala bonds are bonds issued outside India and are denominated in Indian rupee rather than any foreign currency. It has two advantages: Allows to raise capital in foreign market Shields from the fluctuation of exchange rate Both interest and principal payment is done in Indian rupee. The first Masala bond was issued by the World Bank backed International Finance Corporation (IFC) in November 2014. It raised 1,000 crore bond to fund infrastructure projects in India. HDFC was the first Indian company to issue Masala Bond in 2016. It raised 3,000 crore through this. In August, 2016 NTPC issued first corporate masala bond worth Rs 2,000 crore. ┬а

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