Prelims level : Economics Mains level : GS-III Technology, Economic Development, Bio diversity, Environment, Security and Disaster Management
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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).


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.
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