Investors prepare for takeoff in growing Masala bond market

In November, at the headquarters of the London Stock Exchange, Global Capital/Asiamoney hosted a roundtable discussion with several leading industry participants about the Masala bond market and its likely development. The discussion took place in the immediate aftermath of prime minister Narendra Modi’s visit to London, which coincided with a commitment for as much as £1bn of new rupee issuance to be listed on the LSE, broadening the market from the early International Finance Corporation and other supranational issuance to the private sector. The rationale for an offshore rupee bond market is clear: India, and in particular the central bank, want to reduce India’s vulnerability to foreign currency borrowing, while also retaining — for the moment — capital controls. For investors, offshore rupee bonds offer an opportunity to gain exposure to the currency, the economy and, as the market matures, specific credits. But the new market will face challenges, some logistical, and others about fundamental questions of governance. How will the Masala bond market evolve?