A small introduction about masala bonds

1. Always Seek Knowledge, ASK @ ASIBAS
(Strictly for Knowledge sharing)
An initiative under Banking Beyond Classroom... Vol. 1.1 November,
2015
MASALA BONDS
 The rupee denominated bond issuance open up a new source for Indian
corporates to raise funds abroad.
 These bonds,which will be listed on the London Stock Exchange (LSE),
are called masala bonds.
 IFC (International Finance Corp.) has named these ‘Masala’ bonds as
‘masala’ is a globally recognized term that evokes the culture and cuisine of
India. Chinese call their overseas bond issues as Dim-sum, a popularly
known dish in Hong Kong, while Japanese bonds named Samurai after the
country's warrior class.
 Only Indian corporates (banks not allowed) can issue them which are
settled in dollars
 Some of the corporates already announcing its intensions in raising funds
abroad like HDFC, Indian Railway Finance Corporation and NTPC.
ADVANTAGE
 Indian issuer don't face currency risk which is entirely borne by the foreign
investors.
 To hedge risks, overseas investors will be eligible to hedge their exposure
in rupee through permitted derivative products with banks in India.
 Masala bonds are not different from external commercial borrowins(ECBs),
in which indian companies raise funds in foreign currency and are exposed
to rupee-dollar fluctuations.
HOW FOREIGN INVESTOR GAIN..?
 The interest rate offered on the bonds have a cap set by RBI.
 For a 3-5 years bonds issue,the rate has a cap 350 basis points over LIBOR,
while for issue of more than five years the cap is at 500 basis points.
 Interest rates in most countries abroad are low and masala baonds can
therefore provide betteralternative for them to earn high interest.
MASALA BOND RULES
 As per RBI guidelines, not only corporates but also Real Estate Investment
Trusts (REITs) and Infrastructure Investment Trusts(InvITs)are eligible to
issue these bonds.
 These bonds can be privately placed or listed on exchanges as per host
country regulations.
 These bonds will be issued for a minimum maturity period of 5-years.
 The proceeds from these bonds can be used for all purposes
except Real estate activities
 The proceeds will be used for infrastructure investment in India
through infrastructure bonds issued by Axis Bank Ltd, which
plans to raise Rs.6,000 crore by March 2015 through sale of
long-term infrastructure bonds.
Factors at play
 The success ofMasala bond will be the hedging costs.
 The rupee-dollar equation play an important role and its stability
will give foreign investors more confidence to invest.
PENSION WITHOUT TENSION
Digital Life Certificate for Pensioners scheme of the Government of
India known as Jeevan Pramaan seeks to ease the very problem, a
pensionerearlier needed to present himself/herself before the
Pension Disbursing Agency or had the life certificate issued by
authority where they served and had it delivered to the disbursing
agency,by digitizing the whole process of securing the life
certificate. This is aadhar based certification process,it includes
1. LOGIN and ENROL : Pensioners logs in to
www.jeevanpraman.com. Fills in Aadhaar, bank and mobile
phone number details.
2. USE THUMB : User gives biometric details,finger or iris scan,
through a reader for authentication.
3. Get ID : User gets a digital certificate,Unique ID after
authentication through an SMS.
4. Use centre : If you don't want a reader, you can text for help
desks in yourarea by using number on the site
5. Go paperless : User mentions unique ID to bank, pension body.
Can download PDF for proof.
6. Cut the queue : Pension amount gets credited every year in
November
Chalte - chalte
A wealthy investor walked into a bank and said to the bank
manager, “I would liketo speak with Jim Parker,who I have
heard is a tried and trusted employee of yours.”
The banker said,“Yes, he certainly was trusted. And he will be
tried as soon as we catch him.”
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A students driven initiative guided by
Prof. R.C. Bhatnagar, and abily assistated by
Tushar…Prathibha…and… Anjani Kumar.
(ABYB Batch 2015-16) at ASIBAS, AU, Noida .