Home / Money / Calculators /  De-jargoned: Masala bond

International Finance Corp. (IFC), an investment arm of the World Bank, has issued a 10-year, 1,000-crore bond in London to fund infrastructure projects in India. These bonds, which will be listed on the London Stock Exchange (LSE), are called masala bonds.


Masala bonds are Indian rupee denominated bonds issued in offshore capital markets. These will be offered and settled in US dollars to raise Indian rupees from international investors for infrastructure development in India. IFC will convert bond proceeds from dollars into rupees and use the rupees to finance private sector investment in India.

IFC has named these ‘Masala’ bonds as ‘masala’ is a globally recognized term that evokes the culture and cuisine of India. This is not the first time that a bond has been named after the food or culture of a country. Chinese bonds, for example, are called Dim sum bonds, and Japanese ones as Samurai bonds.


This is a 10-year bond with a yield of 6.3% and a AAA benchmark rating. This is not the first rupee denominated offshore issuance to be settled in dollars. IFC had earlier issued offshore rupee bonds with maturities up to seven years. Though there are other offshore rupee bonds, this issuance will be the first to be listed on a stock exchange.

The proceeds will be used for infrastructure investment in India through infrastructure bonds issued by Axis Bank Ltd, which plans to raise 6,000 crore by March 2015 through sale of long-term infrastructure bonds.

IFC will support private investment in the infrastructure sector and sectors that contribute to economic growth and job creation. Hence, future Masala bond issuances may support other kinds of related private sector investments.

The current issue is the first tranche issued under IFC’s $2-billion offshore rupee programme. J.P. Morgan is the sole arranger. Majority of the investors were Europe-based insurance companies.


Issuances in overseas financial centres such as London give countries like India a chance to tap global investors for funding investment needs. The IFC Masala bonds are a boost for Indian rupee-denominated issuances as listing on LSE will provide visibility, and set a benchmark for yields in future issuances. It could also increase demand for similar products later as liquidity of these bonds goes up. This also shows the confidence of international investors in the Indian economy and its currency.

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