In the recent past, a listed housing finance company issued MASALA BONDS for a sum of ₹3,000 crore. Explain the term MASALA BOND. Is there any advantage of MASALA BONDS over NORMAL BONDS ?

Masala Bonds are rupee denominated borrowings by Indian companies in the overseas markets. This is different from the other overseas borrowings in the sense that the in the other borrowings, the currency is normally dollar, euro, yen etc. The masala bonds were reckoned under both corporate debt and external commercial borrowings for Foreign Portfolio investment. The Reserve Bank of India recently amended the Regulations and currently treats Masala Bonds under the ECB category only, where a borrower just needs to seek the RBI's approval to sell those securities. The main advantage of issuing masala bonds is that the company does not have to worry about the depreciation in the rupee in comparison to the other currencies. This is normally a big worry for corporates while raising money in the overseas markets. If the rupee weakens at the time of the redemption of the bonds, the company will have to pay more rupees to repay the dollars. This is a big advantage, as many companies which had raised via the Foreign Currency Convertible Bonds in 2007 found themselves in a great difficulty as the rupee had depreciated very sharply during the global financial crisis. In order to compensate the risk of currency depreciation, the buyer of the Masala Bond will get a higher coupon rate and therefore earns a higher yield. Many public and private companies are in the fray to issue masala bonds as the companies can have access to more funds at a marginally higher cost of financing.