Masala Bonds
Context: Kerala Infrastructure Investment Fund Board issued Masala Bonds to raise funds from the overseas market.
What are Masala Bonds?
Masala Bonds are rupee-denominated bonds i.e the funds would be raised from overseas market in Indian rupees.
Eligibility: Any corporate, body corporate and Indian bank is eligible to issue Rupee denominated bonds overseas.
Limitations:
- RBI mandates that the money raised through such bonds cannot be used for real estate activities other than for development of integrated township or affordable housing projects.
- It also can’t be used for investing in capital markets, purchase of land and on-lending to other entities for such activities as stated above.
Also Read : 7th Economic Census
Where can these bonds be issued and who can subscribe?
- The Rupee denominated bonds can only be issued in a country and subscribed by a resident of such country that is a member of financial action task force and whose securities market regulator is a member of International Organisation of Securities Commission.
- While residents of such countries can subscribe to the bonds, it can also be subscribed by multilateral and regional financial institutions where India is a member country.
What is the minimum maturity of such bonds?
- According to RBI, the minimum maturity period for Masala Bonds raised up to Rupee equivalent of USD 50 million in a financial year should be 3 years and for bonds raised above USD 50 million equivalent in INR per financial year should be 5 years.
- The conversion for such bonds will happen at the market rate on the date of settlement of transactions undertaken for issue and servicing of the bonds, including its redemption.
