UPSC Prelims 2016 Question:

With reference to ‘IFC Masala Bonds’, sometimes seen in the news, which of the statements given below is/are correct?

1. The International Finance Corporation, which offers these bonds, is an arm of the World Bank. 
2. They are the rupee denominated bonds and are a source of debt financing for the public and private sector.
   
   

Select the correct answer using the code given below:

Explanation: 

• Bonds are debt instruments used by corporates to raise money from investors. In 2014, The International Finance Corporation (IFC) issued the first masala bonds in India to fund infrastructure projects. In 2015, IFC issued the first Masala bond listed on the London Stock Exchange.

• • IFC is an arm of the World Bank. It is the largest global development institution focused on the private sector in developing countries. So, statement 1 is correct.

• Characteristics of Masala Bonds:

• Masala Bonds are rupee-denominated bonds issued outside India by Indian entities. 

• They are debt instruments which help to raise money in local currency from foreign investors. 

• Both the government and private entities can issue these bonds. So, statement 2 is correct.

• Any resident of that country can subscribe to these bonds which are members of the Financial Action Task Force.
  
  

Therefore, option (3) is the correct answer.

Subject: Economics | Financial Sectors and Capital Market