From now, firms must get RBI forex dept's nod for masala bonds

The Reserve Bank on Wednesday said its forex department will henceforth examine proposal of companies before they can issue masala bonds to raise funds from overseas markets.

The changes come as part of RBI's norms on external commercial borrowings (ECBs), trade credit, borrowing and lending in foreign currency.

"On a review of the laid down framework for issuance of rupee denominated bonds overseas (masala bonds) and with a view to harmonise the various elements of the ECB framework, it has been decided that any proposal of borrowing by eligible entities by issuance of these bonds will be examined at the Foreign Exchange Department, Central Office, Mumbai," Reserve RBI said in a notification.

Masala bonds are catching up fast as a source of raising fund from overseas markets including those by state-owned companies like NHAI and NTPC.