Canada’s export credit agency Export Development Canada (EDC) sanctioned the first-ever masala loan of Rs. 340 crore($50 million) to Indian firm Infrastructure Leasing & Financial Services(IL&FS). This is the first lending of EDC in Indian Rupees. In a masala IL & FSloan the borrower saves on the hedging cost because the repayment is in rupees. With this IL&FS Financial Services became the first
Indian company to raise money through a rupee-denominated masala loan from overseas investors.
iii. EDC worked with an agent bank, the Bank of Nova Scotia, to structure the loan for IL&FS.
iv. The financing by the EDC is expected to be used for roadway and infrastructure improvement projects by the Indian Firm. As per the MD and CEO of IL&FS, Ramesh Bawa the company will raise masala bond worth $300 million in mid-Decemeber and $700 million by the end of the year.
v. EDC has disbursed $1 billion in 2016 to Indian companies and plans to increase its investment in India to $10 billion by 2020 from $4 billion now.
Masala bond
♦ Masala bond are the Indian rupee denominated bonds. The term refers to a financial instrument which enables Indian entities to raise money from overseas markets in the rupee, not foreign currency.
♦ The International Finance Corporation (IFC), an arm of the World Bank, issued the first masala bonds in October 2013 as part of its $2 billion dollar offshore rupee programme.
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