What are Masala Bonds?

The Enforcement Directorate (ED) has issued summons in connection with the issue of masala bonds by the Kerala Infrastructure Investment Fund Board (KIIFB).

The term ‘Masala Bond’ is also used to describe 'rupee denominated' ever since the first issuer of rupee-denominated bonds used the name Masala Bonds in its first issue.

A rupee denominated bond is a bond issued by an Indian entity in foreign marketsand the interest payments and principal reimbursements are denominated (expressed) in rupees.

One of the objectives to issue Masala Bonds is to internationalise the Indian currency; others being to fund infrastructure projects in India and to fuel internal growth through borrowings.

Any corporate or body corporate in India can raise money abroad through Masala Bonds. Such bonds should have a minimum tenure of 5 years.