Masala Bonds – Rupee Denominated Bonds issued overseas

The Reserve Bank of India (“RBI”) in September 2015 issued guidelines for issuance of Indian Rupee denominated bonds (“RDBs”) overseas (“Guidelines”) which has been recently enhanced. RDBs have ushered a new era for debt-raising by Indian companies, and will integrate financial markets in India further with the rest of the world. Allowing companies to issue RDBs abroad will create new means for both pricing and currency risks, while opening a window for rupee-denominated instruments to trade abroad. This will also aid foreign promoters to invest in Indian entities other than the traditional equity investment channels.

Following the issuance of the Guidelines, the RBI has issued a revised framework for external commercial borrowings (“ECB”) in the form of Master Directions on ECBs, (“Master Directions”). In addition to what is provided in the Guidelines, all the conditions usually applicable to ECBs will be applicable to RDBs.

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