Q: With reference to `IFC Masala Bonds’, sometimes seen in the news, which of the statements given below is/are correct?
a) The International Finance Corporation, which offers these bonds, is an arm of the World Bank.
b) They are the rupee-denominated bonds and are a source of debt financing for the public and private sector.
The correct answer is Both 1 and 2.
Masala Bonds
- It is debt instruments that are used to raise money in local currency from foreign investors.
- It is issued outside India by an Indian entity or a corporate.
- It is also used by Indian corporates to raise funds from foreign investors.
- The goal of such bonds was to stimulate Indian culture at the international platform as ‘masala’ is a Hindi word for spices.
- The first Masala bond was issued in 2014 by International Finance Corporation (IFC) for infrastructure projects in India and IFC is an arm of World Bank group. Hence, Statement 1 is correct.
- They are the rupee-denominated bonds issued to offshore investors and are a source of debt financing for the public and private sectors. Hence statement 2 is correct.
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