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The Reserve Bank of India, after consultation with the government, has allowed Indian banks to raise funds through issuance of rupee-denominated bonds overseas (also called masala bonds) within the present limit of ₹2,44,323 crore set for foreign investment in corporate bonds.
With a view to developing the market for masala bonds overseas, as also providing an additional avenue for Indian banks to raise capital/long-term funds, the RBI said banks can issue perpetual debt instruments qualifying for inclusion as Additional Tier-1 capital under the extant Basel-III capital regulations.
Further, they can also issue long-term rupee-denominated bonds overseas for financing infrastructure and affordable housing, the RBI said in a circular issued to banks authorised to deal in foreign exchange.
According to the RBI, a robust macroeconomic scenario in India and a relatively stable currency view could attract investors to rupee bonds issued overseas by Indian firms.
Foreign investors already involved in the Indian domestic currency space could also be interested in the overseas rupee product.