{"id":1859,"date":"2024-03-30T00:46:30","date_gmt":"2024-03-29T19:16:30","guid":{"rendered":"https:\/\/lotusarise.com\/qna\/?p=1859"},"modified":"2024-04-03T07:09:43","modified_gmt":"2024-04-03T01:39:43","slug":"q-with-reference-to-ifc-masala-bonds-sometimes-seen-in-the-news-which-of-the-statements-given-below-is-are-correct","status":"publish","type":"post","link":"https:\/\/lotusarise.com\/qna\/upsc\/q-with-reference-to-ifc-masala-bonds-sometimes-seen-in-the-news-which-of-the-statements-given-below-is-are-correct","title":{"rendered":"Q. With reference to `IFC Masala Bonds\u2019, sometimes seen in the news, which of the statements given below is\/are correct?"},"content":{"rendered":"\n
    \n
  1. The International Finance Corporation, which offers these bonds, is an arm of the World Bank<\/strong>.<\/li>\n\n\n\n
  2. They are the rupee-denominated bonds and are a source of debt financing for the public and private sector.<\/li>\n<\/ol>\n\n\n\n

    Select the correct answer using the code given below<\/p>\n\n\n\n

      \n
    • 1 only<\/li>\n\n\n\n
    • 2 only<\/li>\n\n\n\n
    • Both 1 and 2<\/li>\n\n\n\n
    • Neither 1 nor 2<\/li>\n<\/ul>\n\n\n\n
      \n

      Answer:<\/strong> (c) Both 1 and 2<\/strong><\/p>\n<\/blockquote>\n\n\n\n

      Masala bonds:<\/h5>\n\n\n\n
        \n
      • Masala bonds are\u00a0bonds issued outside India but denominated in Indian Rupees<\/strong>, rather than the local currency.\n
          \n
        • Masala is a Hindi word meaning spices<\/strong>. The term was used by the International Finance Corporation (IFC) to evoke the culture and cuisine of India<\/strong>.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
        • Unlike dollar bonds, where the borrower takes the currency risk<\/strong>, Masala bonds makes the investors bear the risk<\/strong>.<\/li>\n\n\n\n
        • Masala Bonds were introduced in India in 2014 by International Finance Corporation (IFC).<\/strong><\/li>\n\n\n\n
        • The\u00a0first Masala bond was issued by the World Bank-backed IFC in November 2014 when it raised \u20b910 billion bonds to fund infrastructure projects<\/strong>\u00a0in India.\n
            \n
          • Later in August 2015 International Financial Cooperation for the first time issued green masala bonds and raised \u20b93.15 Billion to be used for private sector investments<\/strong> that address climate change in India.<\/li>\n\n\n\n
          • In July 2016 HDFC raised \u20b930 billion from Masala bonds and thereby became the first Indian company to issue masala bonds<\/strong>.<\/li>\n\n\n\n
          • In the month of August 2016 public sector unit NTPC issued first corporate green masala bonds worth \u20b920 billion.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
          • Characteristics of Masala Bonds<\/strong>:\n
              \n
            • Masala Bonds are rupee-denominated bonds issued outside India<\/strong> by Indian entities.<\/li>\n\n\n\n
            • They are debt instruments <\/strong>which help to raise money in local currency<\/strong> from foreign investors.<\/li>\n\n\n\n
            • Both the government and private entities can issue<\/strong> these bonds. Investors outside India who would like to invest in assets in India can subscribe to these bonds.<\/li>\n\n\n\n
            • Any resident of that country can subscribe to these bonds which are members of the Financial Action Task Force.<\/strong> The investors who subscribe should be whose securities market regulator is a member of the International Organisation of Securities Commission<\/strong>. Multilateral and Regional Financial Institutions which India is a member country<\/strong> can also subscribe to these bonds.<\/li>\n\n\n\n
            • According to RBI, the maturity period is three years for the bonds raised to the rupee equivalent of 50 million dollars <\/strong>in a financial year. The maturity period is five years for the bonds raised above the rupee equivalent of 50 million dollars<\/strong> in a financial year.<\/li>\n\n\n\n
            • The conversion of these bonds happens at market rate on the date of settlement of transactions<\/strong> undertaken for issue and servicing of interest of the bonds.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
            • The proceeds raised from these bonds can be used:<\/strong>\n
                \n
              • In refinancing of rupee loan and non-convertible debentures.<\/li>\n\n\n\n
              • For the development of integrated townships and affordable housing projects.<\/li>\n\n\n\n
              • Working capital to corporate.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
              • RBI mandates the proceeds raised from these bonds cannot be used:<\/strong>\n
                  \n
                • In real estate activities, not including the development of integrated townships and affordable housing projects.<\/li>\n\n\n\n
                • Activities prohibited according to Foreign Direct Investment guidelines.<\/li>\n\n\n\n
                • Investing in capital markets and usage of the proceeds for equity investment domestically.<\/li>\n\n\n\n
                • Purchase of land.<\/li>\n\n\n\n
                • On-lending to other entities for any of the above purposes.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n
                  International Finance Corporation<\/h6>\n\n\n\n
                    \n
                  • The International Finance Corporation (IFC) was founded in 1956<\/strong> with Washington, DC as its headquarters.<\/li>\n\n\n\n
                  • It is the private sector arm of The World Bank<\/strong>. It is a member of the World Bank Group<\/strong>.<\/li>\n\n\n\n
                  • Mandate:<\/strong> Advance economic development and improve the lives of people by encouraging the growth of the private sector in developing countries.<\/li>\n\n\n\n
                  • Functions:<\/strong>\u00a0It helps countries develop their private sectors in a variety of ways\n
                      \n
                    • Investing in companies through loans, equity investments<\/strong>, debt securities<\/strong> and guarantees.<\/li>\n\n\n\n
                    • Mobilizing capital from other lenders and investors through loan participations, parallel loans and other means.<\/li>\n\n\n\n
                    • Advising businesses and governments to encourage private investment and improve the investment climate.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
                    • Governance:<\/strong> The IFC is owned and governed by its member countries<\/strong>. It is a corporation whose shareholders are member governments that provide paid-in capital and have the right to vote on its matters.<\/li>\n\n\n\n
                    • The President of the World Bank Group is also the President of the IFC.<\/strong><\/li>\n<\/ul>\n\n\n
                      \n
                      \"International<\/figure>\n<\/div>","protected":false},"excerpt":{"rendered":"

                      Select the correct answer using the code given below Answer: (c) Both 1 and 2 Masala bonds: International Finance Corporation<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[1,3],"tags":[38],"years":[57],"class_list":["post-1859","post","type-post","status-publish","format-standard","hentry","category-upsc","category-prelims","tag-indian-economy","years-57"],"acf":[],"taxonomy_info":{"category":[{"value":1,"label":"UPSC"},{"value":3,"label":"Prelims"}],"post_tag":[{"value":38,"label":"Indian Economy"}],"years":[{"value":57,"label":"2016"}]},"featured_image_src_large":false,"author_info":{"display_name":"LotusArise","author_link":"https:\/\/lotusarise.com\/qna\/author\/team-lotusarise"},"comment_info":0,"category_info":[{"term_id":1,"name":"UPSC","slug":"upsc","term_group":0,"term_taxonomy_id":1,"taxonomy":"category","description":"","parent":0,"count":1269,"filter":"raw","cat_ID":1,"category_count":1269,"category_description":"","cat_name":"UPSC","category_nicename":"upsc","category_parent":0},{"term_id":3,"name":"Prelims","slug":"prelims","term_group":0,"term_taxonomy_id":3,"taxonomy":"category","description":"","parent":1,"count":1251,"filter":"raw","cat_ID":3,"category_count":1251,"category_description":"","cat_name":"Prelims","category_nicename":"prelims","category_parent":1}],"tag_info":[{"term_id":38,"name":"Indian Economy","slug":"indian-economy","term_group":0,"term_taxonomy_id":38,"taxonomy":"post_tag","description":"","parent":0,"count":225,"filter":"raw"}],"_links":{"self":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1859","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/comments?post=1859"}],"version-history":[{"count":0,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1859\/revisions"}],"wp:attachment":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/media?parent=1859"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/categories?post=1859"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/tags?post=1859"},{"taxonomy":"years","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/years?post=1859"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}