29. Which of the following are true about Masala Bonds?
1.This debt instruments may protect Indian entity against the risk of currency fluctuation.
2.Real Estate Investment Trusts or Infrastructure Investment Trusts cannot issue such bonds.
3.Proceeds incurred through these bonds will be considered as External commercial borrowing (ECB).
4. Dim-sum is a similar Japanese bond has been around for a while.
Correct answer code is:
29. Which of the following are true about Masala Bonds?
1.This debt instruments may protect Indian entity against the risk of currency fluctuation.
2.Real Estate Investment Trusts or Infrastructure Investment Trusts cannot issue such bonds.
3.Proceeds incurred through these bonds will be considered as External commercial borrowing (ECB).
4. Dim-sum is a similar Japanese bond has been around for a while.
Correct answer code is:
The correct options are
A Only 1, 2 and 3
C Only 1 and 3
Masala Bond refers to rupee-denominated borrowings by Indian entities in overseas markets. IFC named them Masala bonds to give a local flavour by calling to mind Indian culture and cuisine. The Masala bonds refer to rupee-denominated bonds through which Indian entities can raise money from foreign markets in rupee, and not in foreign currency. Basically, they are debt instruments that are typically used by corporates to raise money from investors. Through issuance of rupee denominated bonds, Indian entity is protected against the risk of currency fluctuation, typically associated with borrowing in foreign currency. Masala bonds also help in internationalization of the rupee and in expansion of the Indian bond markets. While it may seem odd to name a staid debt instrument after food stuffs, it has been done in the past.
Chinese bonds, named Dim-sum bonds after a popular dish in Hong Kong, have been around for a while. So have Japanese bonds named Samurai after the country’s warrior class. The Reserve Bank of India (RBI) has increased corporate bond investment limit for foreign investors by taking out Masala bonds from ambit of total debt investment limit. They will be considered as part of External Commercial Borrowings (ECBs) and will be monitored accordingly. Any corporate (entity registered as a company under the Companies Act, 1956/ 2013) or body corporate (entity specially created out of a specific act of the Parliament) and Indian banks are eligible to issue Rupee denominated bonds overseas. Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) coming under the regulatory jurisdiction of the Securities and Exchange Board of India (SEBI) are also eligible. Other resident entities like Limited Liability Partnerships and Partnership firms, etc. are not eligible to issue these bonds.
A Only 1, 2 and 3
C Only 1 and 3
Masala Bond refers to rupee-denominated borrowings by Indian entities in overseas markets. IFC named them Masala bonds to give a local flavour by calling to mind Indian culture and cuisine. The Masala bonds refer to rupee-denominated bonds through which Indian entities can raise money from foreign markets in rupee, and not in foreign currency. Basically, they are debt instruments that are typically used by corporates to raise money from investors. Through issuance of rupee denominated bonds, Indian entity is protected against the risk of currency fluctuation, typically associated with borrowing in foreign currency. Masala bonds also help in internationalization of the rupee and in expansion of the Indian bond markets. While it may seem odd to name a staid debt instrument after food stuffs, it has been done in the past.
Chinese bonds, named Dim-sum bonds after a popular dish in Hong Kong, have been around for a while. So have Japanese bonds named Samurai after the country’s warrior class. The Reserve Bank of India (RBI) has increased corporate bond investment limit for foreign investors by taking out Masala bonds from ambit of total debt investment limit. They will be considered as part of External Commercial Borrowings (ECBs) and will be monitored accordingly. Any corporate (entity registered as a company under the Companies Act, 1956/ 2013) or body corporate (entity specially created out of a specific act of the Parliament) and Indian banks are eligible to issue Rupee denominated bonds overseas. Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) coming under the regulatory jurisdiction of the Securities and Exchange Board of India (SEBI) are also eligible. Other resident entities like Limited Liability Partnerships and Partnership firms, etc. are not eligible to issue these bonds.
