Offshore Rupee Bonds

Offshore Rupee Bonds are financial instruments denominated in Indian rupees issued by multilateral institutions like ADB, IFC offshore capital markets which allow investors to take exposure to Indian rupees. The investment in these bonds is made in foreign currency which is then converted to Indian rupees and invested in India. These are settled in foreign currency (usually US dollar).

It provides alternate source of funding to Indian companies. The success of offshore rupee bonds reflects confidence of international/foreign investors in Indian economy.

These are commonly known as Masala Bonds.

Advantage of Offshore Rupee Bonds

  • It allows issuer of bond to pass currency risk exposure on to investors
  •  It will deepen the Indian bond market
  • There will be less pressure on banks to lend to corporates as it provides alternate source of funding for corporates
  •  It brings more liquidity and funds

Who issued so far?

  •  In November 2014, IFC sold Rs 1,000 crore worth of offshore 10-year Indian currency bonds
  • ADB raised Rs 300 crore from an offshore rupee-linked bond issue

RBI guidelines on Issuance of Rupee denominated bonds overseas

RBI has issued following guidelines on 29th September, 2015:

  • Any corporate or body corporate as well as Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) can borrow
  • Minimum maturity period is of 5 years
  • With the prior approval of RBI, investor can invest the amount will be equivalent of USD 750 million per annum under the automatic route.

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