RBI revises masala bond framework

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The Reserve Bank of India (RBI) through Circular No. 47 dated 6 June amended the framework governing the issuance of rupee denominated bonds overseas, referred to as masala bonds.

The minimum original maturity period for masala bonds shall be three years for bonds raised up to US$50 million equivalent in rupees per financial year, and five years for bonds raised above US$50 million equivalent in rupees per financial year.

The all-in-cost ceiling for masala bonds shall be 300 basis points over the prevailing yield of government of India securities of corresponding maturity.

Any entity permitted as an investor for the purpose of masala bonds in terms of paragraph 3.3.3 of Master Direction No. 5, on external commercial borrowings, trade credit, borrowing and lending in foreign currency by authorized dealers and persons other than authorized dealers, issued by the RBI on 1 January 2016, shall be eligible, provided it is not a “related party” in terms of the Companies (Accounting Standards) Rules, 2006.