A rupee denominated bond is a bond issued by an Indian/recognized entity in foreign markets and the interest payments and principal reimbursements are denominated (expressed) in rupees. The rupee denominated bond is known as masala bonds after the International Financial Corporation (IFC) issued rupee denominated bond under the name masala bond.
The peculiarity of rupee denominated bond is that buying of bonds, interest payments and repayment all are expressed in rupees. All payments are converted into corresponding dollar values at the time of payment. The term ‘masala bond’ is also used to describe rupee denominated ever since the first issuer of rupee denominated bonds used the name masala bonds in its first issue. RBI in its August 2016 regulations also used this name.
