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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