Masala Bond: Meaning, Features and the KIIFB ED Notices
Why in the news
The Enforcement Directorate served show-cause notices on Kerala’s Chief Minister, former Finance Ministry officials and KIIFB officials over alleged FEMA and RBI breaches in KIIFB’s 2019 Masala Bond issue.
Key facts
- Masala Bond: INR-denominated bond issued abroad by an Indian entity.
- Currency risk: borne by the investor, unlike ECBs.
- First issue: IFC, 2014, about ₹1,000 crore; RBI allowed them in 2015.
| Aspect | Detail |
|---|---|
| Issuers | Corporates, NBFCs, REITs, InvITs |
| Listing | London and Singapore, among others |
| Maturity | 5 years at first, later 3 |
| Barred uses | Capital markets, real estate (except affordable housing), land, FDI-prohibited sectors |
| Tax | 5% withholding on interest; rupee-appreciation gains exempt |
Objectives
- Reduce reliance on ECBs and shift forex risk to investors.
Exam angle
- Risk bearer: investor.
- Years: 2014 (first issue), 2015 (RBI nod).