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Masala Bond the word first put its foot on London Stock Exchange where it got its name “The Masala Bond”. When PM’s visit in 2016 to the UK to grow funds and a favored destination to attract investors, these bonds primarily registered on the London Stock Exchange and got their name ‘The Masala Bond”.
There are other similar Foreign Currency Denomination Bonds like Dim Sim in China and the Samurai Bond in Japan.
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Masala Bonds are bonds that issued outside India to raise money from the overseas market in rupees and not in other foreign currency. The Masala bond has eased down the situation where Indian Companies had to earlier depend only on the External Commercial Borrowing that was raised and repaid in Dollars only. Masala Bonds quickly become a game-changer for Corporate Debt, market due to high benefits offered to both issuer and investors.
There are many stories that running sharply towards this direction and more than 4 times oversubscribed by the people soon after its listing in the UK. The Indian Railways Finance Corporation has successfully filled the bucket with around 1 billion followed by the NTPC. Furthermore, HDFC bank also has become the First Indian Company to raise Rs 3000 Crores from Masala Bonds.
The transaction of the Rupee- denominated bonds like buying of bonds, payments of interest, and repayment of all are expressed in Rupees. Looking at the traditional method of Foreign Currency bond that is issued by the Indian entity where the risk only lies in the hand of the investors and did not bear by the Indian Issuer Company.
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Masala Bond can be very helpful in growing funds and give impetus to the economy through the diplomatic exchange. Since the economic growth and Currency have been completely depending on the external factors, invest need to put issuers through a lot of scrutinies and have to keep an eye on their creditability.
Read More: RBI Eases External Commercial Borrowing (ECB) Norms: January 2019.
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