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Soumik Dey
Soumik Dey


British Columbia becomes first government to issue masala bonds

british-columbia-reuters British Columbia's three year term masala bond was priced to yield 6.62 per cent on a half-yearly basis | Reuters

British Columbia, a Canadian province, became the first government to issue Indian rupee denominated bond on LSE on Friday. This made the country the first one to issue a bond in the offshore market and for strengthening increasingly important and investment ties with India, said Candain finance minister Michael de Jong on Friday.

Masala bond is an investment instrument bond approved by the RBI, that raises INR funds from global investors outside of India. Masala bond is also called a synthetic bond as payment under the bond are made in US dollars based on prevailing rupee dollar exchange rate. British Columbia's three year term masala bond was priced to yield 6.62 per cent on a half-yearly basis and was released to raise an approximate INR 50 lakh.

Th masala bond was issued to the British Volumbia province by private Indian bank HDFC, which will generate a positive return to British Columbia's taxpayers and manage their investment in the Indian rupee against currency market and fiscal risks, the bank said in a statement.

"The bond issue demonstrates our province's confidence in the outlook for India. British Columbia wants to participate in the internationalisation of the INR and India's economy," said Jong, in a statement released by the Canadian High Commission.

British Columbia was also the first country that had invested in the Chinese Remnibi dominated bond that were issued by the Chinese government in 2013.

Along with HSBC, TD Securities and Scotiabank will be joint managers of the masala bond. The issue of the INR dominated bond was oversubscribed by more than three times by investors in British Columbia from North America (56% ), Europe (30%) and Asia (14%).

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Topics : #RBI

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