Overexposure to Masala Bonds kills its forex boons

Abstract

Masala bonds are nothing but another form of a debt instrument — the only difference being that these bonds are denominated in Indian rupees, but are issued in geographies outside India. Such type of bonds were first issued by the International Finance Corporation (IFC) in November 2014 — the quantum of the issue was Rs 10 billion (Rs 1,000 crore) and the bonds were listed on the London Stock Exchange (LSE). The idea behind issuing the bonds was to raise capital to fund infrastructure projects in India. The name ‘Masala Bonds’ came about in IFC’s effort to give a bit of Indian flavour to the name, and therefore relying on the Indian culture and cuisine; basing it on the fact that Indian cuisine as represented by the ‘Spicy Masala Curry’, which is quite popular throughout the western world.

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