Why in News:

• Leader of the Opposition has alleged that a Canadian company having close links with SNC-Lavalin has bought a major part of the masala bond for ₹2,150 crore issued by the Kerala Infrastructure Investment Finance Board (KIIFB).

Details

What are Masala Bonds?

• Masala bonds are bonds issued outside India but denominated in Indian Rupees, rather than the local currency.
• Unlike dollar bonds, where the borrower takes the currency risk, masala bond makes the investors bear the risk.
• Masala bonds will help to internationalize the Indian rupee and also deepen the Indian financial system.
• By issuing bonds in rupees, an Indian company is shielded against the risk of currency fluctuation, typically associated with borrowing in foreign currency.
• Cost of borrowing could also turn out to be lower than domestic markets.