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The Masala bond refers to a rupee-denominated bond through which Indian entities can raise money from foreign markets in rupee, and not in foreign currency
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Bonds are instruments of debt that are typically used by corporates to raise money from investors
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By issuing bonds in rupees, an Indian entity is protected against the risk of currency fluctuation, typically associated with borrowing in foreign currency
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Masala bonds also help in internationalization of the rupee and in expansion of the Indian bond markets. These bonds are usually traded on a foreign exchange like the LSE and not in India.
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Why in new?
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HDFC became first Indian company to issue masala bonds.
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The Reserve Bank of India (RBI) has increased corporate bond investment limit for foreign investors by taking out Masala bonds (rupee-denominated bonds) from ambit of total debt investment limit.