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.

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YESPYQ · Accepted Answer

Correct answer: Both 1 and 2. Statement 1 is correct: The International Finance Corporation (IFC) is a member of the World Bank Group, fo- cusing specifically on private sector development in developing countries. It acts as a sister organization to the International Bank for Reconstruction and Development (IBRD), but with a distinct mandate to promote private enterprise. Statement 2 is correct: “Masala bonds” are rupee-denomi- nated bonds issued by international entities, such as the IFC, in offshore markets. The proceeds from these bonds are typically used to finance projects in India, and the principal and interest payments are made in Indian rupees. This means that investors bear the currency risk, as the value of the rupee can fluc- tuate relative to other currencies. Masala bonds serve as a source of debt financing for both public and private sector entities in India, allowing them to raise capital for infrastructure projects, business expansion, and other development initiatives. The rupee denomination of these bonds makes them attractive to international investors seeking exp

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