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Generate QuizWhat is a 'Masala Bond'?
- A bond issued by the Indian Government in foreign currencies to fund infrastructure
- A rupee-denominated bond issued by Indian entities in overseas capital markets
- A high-yield junk bond issued by spice-exporting companies
- A sovereign gold bond linked to the price of domestic spices
Answer: A rupee-denominated bond issued by Indian entities in overseas capital markets
Masala Bonds allow Indian corporations or the government to raise foreign capital without taking on currency risk. Because the bond is issued and redeemed strictly in Indian Rupees, the foreign investor bears the risk of Rupee depreciation. This makes it an attractive hedging tool for Indian borrowers who want access to deep global capital markets but fear volatile exchange rates.