With reference to ‘IFC Masala Bonds’, sometimes seen in the news, which of the statements given below is/are correct? 1. The International Finance Corporation, which offers these bonds, is an arm of the World Bank. 2. They are the rupee-denominated bonds and are a source of debt financing for the public and private sector. Select the correct answer using the code given below.
- (a) 1 only
- (b) 2 only
- (c) Both 1 and 2 ✓ UPSC's answer
- (d) Neither 1 nor 2
Why the answer is (c)
• The International Finance Corporation, the World Bank Group's private-sector arm (statement 1), issued the first 'Masala Bonds' in 2014–15 on the London Stock Exchange.
• Masala Bonds are rupee-denominated bonds sold to overseas investors, so the currency risk sits with the investor; they raise debt for Indian public and private entities (statement 2) — NTPC and HDFC later issued them.
• Hence both 1 and 2, option (c).
Why the other options are wrong
- (a) 1 only
- Statement 2 is also correct: they are rupee-denominated debt.
- (b) 2 only
- Statement 1 is also correct: IFC is a World Bank arm.
- (d) Neither 1 nor 2
- Both statements are correct.
Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2016, held on 7 August 2016. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.