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 an

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Q: 83 (IAS/2016)
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.

question_subject: 

Economics

question_exam: 

IAS

stats: 

0,156,117,23,89,156,5

keywords: 

{'ifc masala bonds': [0, 0, 0, 1], 'bonds': [0, 0, 1, 1], 'international finance corporation': [0, 1, 2, 2], 'debt financing': [0, 0, 0, 2], 'world bank': [0, 1, 0, 3], 'arm': [2, 0, 1, 5]}

The correct answer is Option 3: Both 1 and 2.

Explanation:

IFC Masala Bonds are rupee-denominated bonds issued by the International Finance Corporation (IFC), which is an arm of the World Bank Group. Therefore, statement 1 is correct.

IFC Masala Bonds are a source of debt financing for the public and private sector in India. They were introduced in 2014 to encourage international investment in India`s infrastructure and affordable housing sectors. These bonds are denominated in Indian rupees, which means that the risk of currency fluctuations is borne by the investor rather than the issuer. Therefore, statement 2 is also correct.

IFC Masala Bonds are an innovative financing tool that allows the IFC to raise funds in Indian rupees from global investors. These funds are then used to finance development projects in India. The IFC has raised over INR 60 billion (approximately USD 1 billion) through these bonds since their introduction in 2014.

It is worth noting that Masala Bonds have some advantages over other forms of financing, such as the ability to tap into new sources of capital and diversify funding sources. They also provide a means for investors to gain exposure to India`s growing economy while managing currency risk.

In conclusion, both statements 1 and 2 are correct, and IFC Masala Bonds are an important financing tool for infrastructure and affordable housing projects in India.