What are Masala Bonds? 

• About: Masala Bonds are the rupee-denominated bonds issued to overseas buyers for raising money by the Indian corporates. The price of the bond is denominated in Indian currency. 
• The currency exchange risk is borne by the foreign investor, not the Indian issuer. This protects Indian borrowers from rupee depreciation volatility. 
• Origin & Objective: The term was introduced by the International Finance Corporation (IFC) to reflect India’s cultural identity (masala meaning spice blend). 
• Its primary objective is to help Indian entities raise foreign capital without forex risk and to internationalize the Indian Rupee. 
• Regulations: Governed by RBI guidelines under the External Commercial Borrowing (ECB) framework and Securities and Exchange Board of India (SEBI) norms. 
• Listing: Typically listed on major international exchanges like the London Stock Exchange (LSE) or Singapore Exchange to attract global investors. 
• The first Masala Bond was issued in November 2014 by the IFC on the London Stock Exchange. 
• Maturity Norms: Under RBI guidelines, the minimum maturity is 3 years for bonds raising up to USD 50 million equivalent and 5 years for amounts above that threshold. 
• Eligible Investors and Issuers: These bonds target qualified foreign investors (e.g., sovereign wealth funds, global pension funds, and insurers) who can take on rupee-denominated risk. 
• Eligible Issuers: Indian corporations, NBFCs, and government-affiliated entities. 
• Permitted & Restricted End-Uses of Funds: 
• Permitted Uses: Refinancing existing rupee-denominated debt, Funding infrastructure, affordable housing, and integrated townships, and Meeting corporate working capital requirements. 
• Restricted Uses: Real estate (except approved housing projects), Activities barred under FDI guidelines, Investment in domestic capital/equity markets, Land purchase or on-lending for prohibited activities.