Context:
The New Development Bank (NDB), a multilateral development bank established by BRICS countries (Brazil, Russia, India, China, South Africa), plans to issue its first rupee-denominated bond in the Indian domestic market before March 2026. The move is aimed at providing local currency financing for Indian projects and is seen as a step towards the internationalisation of the Indian rupee.
Rupee-Denominated Bond in India
A rupee-denominated bond is a type of debt instrument issued in Indian rupees (INR), where investors lend money to the issuer (government, company, or institution) and receive interest plus repayment in rupees.
Key Features of Rupee-Denominated Bonds
- Currency of Denomination:
- The bond is issued and repaid in Indian rupees, not in foreign currency.
- Issuers:
- Can be issued by Indian entities (government, corporates, NBFCs, banks) in domestic markets.
- Also issued by foreign institutions like the International Finance Corporation (IFC) or the New Development Bank (NDB) to raise funds in rupees.
- Investor Base:
- Attracts both domestic and foreign investors who want exposure to India’s growth story.
- Purpose:
- Helps raise funds for infrastructure, development projects, or corporate financing.
- Promotes internationalisation of the rupee by encouraging its use beyond India’s borders.
- Types:
- Domestic Rupee Bonds: Issued in India for local investors.
- Masala Bonds: Rupee-denominated bonds issued overseas, listed in foreign exchanges (repayment still in rupees).
Example
- If the New Development Bank (NDB) issues a ₹-denominated bond worth ₹4,000 crore, investors buy it in rupees, and NDB must repay in rupees (interest + principal).
