Indian curry took the world by storm and replaced fish and chips to become the No.1 favorite dish of the UK. With PM’s visit in 2016 to the UK to harness funds and a step in making UK a preferred investment partner of India and a favored destination to attract investors; these bonds primarily registered in London Stock Exchange got their name ‘The Masala Bond’.
There are other similar Foreign Currency Denomination Bonds like the Dim Sum in China and the Samurai Bond in Japan.
The peculiar term was first used by The International Finance Corporation (IFC) – a World Bank affiliate, the first major issuer of these bonds, to give it a strong Indian ting.
What are Masala Bonds ?
- Masala bonds are bonds issued outside India where Indian entities can raise money from the overseas market in rupees (and not foreign currency).
- This has eased the situation where Indian companies had to earlier depend only on External Commercial Borrowings (ECB) that were Raised and Repaid in dollars only.
For Ex: Imagine a payment transfer where the issue and repayment are years apart. Masala Bonds quickly become a game changer for Corporate Debt market due to high benefits offered to both issuer and investors.