In its fourth bimonthly monetary policy RBI said, it has been decided to permit corporates to issue rupee denominated bonds often referred as 'masala bond' with a minimum maturity of five years at overseas locations within the ceiling of foreign investment permitted in corporate debt of USD 51 billion.
Commenting on the move Jaitley said, "Indian corporate would also now be able to raise ECB (External Commercial Borrowing) through rupee denominated off-shore bond with no end use restriction."
The RBI policy, he said, will boost confidence and investment.
There is an appetite of rupee denominated bonds in the overseas markets, Economic Affairs Secretary Shaktikanta Das said.
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"The rupee denominated bonds, since the entire bond would be raised rupees and repayment would also in rupee, there is inherent hedging because the exchange rate fluctuation that risk doesn't exist," Das said.
It's after extensive consultation that this has been announced by the RBI, Das added.
RBI said there will be no restriction on the end use of funds except a small negative list.
As per the draft ECB norms, the currency risk with regard to rupee denominated ECB lies with the lender or investor and hence the modified framework provides for minimal control for these borrowings.