Jul 01, 2017

Changes to Framework for Masala Bonds

The RBI, by way of Circular No. 47 dated June 7, 2017, has reviewed the existing framework in relation to the issuance of rupee denominated bonds overseas (‘Masala Bonds’) in order to harmonize the various elements of the ECB framework and revised the framework. The circular provides as follows:

(i) Proposal for issuance of Masala Bonds will be examined by the Foreign Exchange Department; (ii) The minimum original maturity period for Masala Bonds up to USD 50 million (equivalent in INR per financial year) is 3 years and for Masala Bonds above USD 50 million is 5 years. Previously, such bonds were subject to a minimum maturity of 3 years; (iii) The all-in-cost ceiling for Masala Bonds will be 300 basis points over the prevailing yield of the Government of India securities of corresponding maturity. Previously, the all-in-cost ceiling was to be commensurate with the prevailing market conditions; and (iv) Investors in Masala Bonds should not be related parties (within the meaning given in Ind-AS 24).




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