Masala Bonds

International Finance Corporation (IFC), a member of the World Bank, issued a 10-year, 10 billion Indian rupee bond (equivalent to $163 million) to increase foreign investment in India, mobilizing international capital markets to support infrastructure development in the country. J.P. Morgan was the sole arranger for the bond.

IFC issued the bonds in London to leverage the city’s standing as a premier financial center. Issuances in overseas financial centres such as London give countries like India a chance to tap global investors for funding investment needs. The vast majority of investors are European insurance companies.

The IFC Masala bonds are a boost for Indian rupee-denominated issuances as listing on LSE will provide visibility, and set a benchmark for yields in future issuances. It could also increase demand for similar products later as liquidity of these bonds goes up. This also shows the confidence of international investors in the Indian economy and its currency.

The bonds were issued under IFC’s $2 billion offshore rupee program with a AAA benchmark rating. The bonds yield 6.3%. Given the IFC’s triple A rating, the yield is almost two percentage points lower than the rate at which the government of India itself can raise money.

The “Masala bonds” mark the first rupee bonds listed on the London Stock Exchange. This is the longest dated offshore issue in the rupee markets so far at 10 years. Proceeds from the offering will support a forthcoming infrastructure bond issuance by Axis Bank, which plans to raise Rs 6,000 crore by March 2015.

Rupee-denominated assets have become more attractive after the Indian currency rallied 2.3% in the past year to 61.69 per dollar, the best performance among emerging-market peers. International investors have plowed a record $23 billion into onshore rupee debt so far in 2014, exchange data show. Bond risk for Indian firms fell this year. The average cost of credit-default swaps protecting the debt of eight Indian issuers dropped 128 basis points, or 1.28 percentage point, to 209, according to data provider CMA.

Earlier this year, IFC sold four separate “Maharaja” bonds worth about $100 million on September 23, 2014. The AAA-rated IFC Maharaja Bonds are listed on the National Stock Exchange (NSE). This was the first time in a decade that an international financial institution had raised onshore debt in Indian rupee.

Foreign bonds have a variety of nicknames: A bond sold by a foreign company in the United States is known as a Yankee bond; a bond sold by a foreign firm in Japan is a Samurai and pound sterling-denominated bonds which are issued by non-British borrowers in the British market are called Bulldog bonds.

masala bonds

masalaThe “masala” bond is the Indian counterpart of the “dim sum” label applied to Chinese offshore issues, which the IFC has also pioneered. Bonds issued inside India are known as Maharaja bonds. IFC has named these “Masala” bonds as “masala” is a globally recognized term that evokes the culture and cuisine of India.


Crabtree, J (2014), “IFC launches India’s first Maharaja bond“, Financial Times, 23 September.

IFC Press Release (2014), “First Masala Bonds in London, Attracting International Investment for Infrastructure in India“, IFC Issues, 10 November. Washington, DC: International Finance Corporation.

Joshi, A. and L. Karunungan (2014), “Masala Bonds in London Boosting Modi Project Push: India Credit“, Bloomberg News, 17 November.


  1. Some long term fund flow would be there hopefully.
    They could have officially named it Masala Bonds! Some other names for consideration are Mirchi Bonds – could be Hari or Lal Mirchi, Mishti Doi Bond, Gajar-Halwa Bond etc.

    Liked by 1 person

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