Masala Bonds

Abstract

Researchers and experts in emerging market economies have proven that one of the major impediments to growth in these economies is lack of availability of capital funds for different sectors. This shortage of long term capital is felt severely in infrastructure projects of emerging economies. India being one among the leading economies in this group too faces this problem of long term funding for its varied industry sectors. Indian government and financial authorities were always on the lookout for proper capital sourcing channels to boost the economy. One recent innovation in this pursuit is introduction of Masala Bonds or those bonds issued in international markets by Indian entities or international entities denominated in Indian Rupees. These bonds will be issued and redeemed in Indian Rupees, but the payment and settlement will be in US dollars considering the exchange rates approved by RBI on the issue date and redemption date.