Q. With reference to `IFC Masala Bonds’, sometimes seen in the news, which of the statements given below is/are correct?
- The International Finance Corporation, which offers these bonds, is an arm of the World Bank.
- They are the rupee-denominated bonds and are a source of debt financing for the public and
private sector.
Select the correct answer using the code given below.
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
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.
Additional Information
- The World Bank Group (WBG) consists of five organizations –
- International Bank for Reconstruction and Development (IBRD)
- International Development Association (IDA)
- International Finance Corporation (IFC)
- Multilateral Investment Guarantee Agency (MIGA)
- International Centre for Settlement of Investment Disputes (ICSID)
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