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Q8 (IAS/2016) Economy › Economy Current Affairs › Capital market developments Official Key

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.

Result
Your answer: —  ·  Correct: C
Explanation

The correct answer is option C because both statements are accurate.

The International Finance Corporation (IFC) is indeed an arm of the World Bank group[2], and the word 'Masala' was used by IFC to symbolize the culture of India for specifically distinguishing Indian rupee-denominated bonds from other bonds[2]. This confirms Statement 1 is correct.

Masala Bonds are rupee-denominated bonds that can be issued by governmental bodies, NBFCs and eligible corporates to raise money from overseas markets[5]. Since they can be issued by both governmental bodies (public sector) and corporates/NBFCs (private sector), they serve as a source of debt financing for both sectors. This confirms Statement 2 is correct.

The first Masala Bond was issued by International Finance Corporation (IFC) in 2014[5], establishing IFC's pioneering role in this instrument. Therefore, both statements 1 and 2 are correct, making option C the right answer.

Sources
  1. [1] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 9: Agriculture > MASALA BOND > p. 266
  2. [2] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 9: Agriculture > MASALA BOND > p. 266
  3. [3] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 9: Agriculture > 8.28 Indian Economy > p. 284
  4. [4] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 9: Agriculture > 8.28 Indian Economy > p. 284
  5. [5] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 9: Agriculture > 8.28 Indian Economy > p. 284
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Don’t just practise – reverse-engineer the question. This panel shows where this PYQ came from (books / web), how the examiner broke it into hidden statements, and which nearby micro-concepts you were supposed to learn from it. Treat it like an autopsy of the question: what might have triggered it, which exact lines in the book matter, and what linked ideas you should carry forward to future questions.
Q. With reference to 'IFC Masala Bonds', sometimes seen in the news, which of the statements given below is/are correct? 1. The Internationa…
At a glance
Origin: From standard books Fairness: High fairness Books / CA: 10/10 · 0/10
You're seeing a guest preview. The Verdict and first statement analysis are open. Login with Google to unlock all tabs.

This is a textbook example of a 'Current Affairs term anchored in Static Economy'. While Masala Bonds were a buzzword in 2015-16, the question tests fundamental definitions available in standard texts. If a new financial instrument appears in news, you must define: Issuer, Currency, and Risk-bearer.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
Is the International Finance Corporation (IFC), issuer of IFC Masala Bonds, part of the World Bank Group (an arm of the World Bank)?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 9: Agriculture > MASALA BOND > p. 266
Presence: 5/5
“The word 'Masala' was used by IFC (arm of World Bank group) to symbolise the culture of India for specifically distinguishing Indian rupee-denominated bonds from other bonds. Similarly, 'Dim Sum Bonds' are used for bonds issued in Hong Kong, denominated in Chinese Renminbi and Komodo Bonds for Indonesia. Issue of Masala Bonds creates demand for rupee and thus helps in preventing depreciation of currency. Masala Bonds cannot be used for investing in capital markets, purchasing land, etc.”
Why this source?
  • Explicitly identifies IFC as 'arm of World Bank group' in context of Masala Bonds.
  • Links IFC directly to the naming/issuance context of Masala Bonds, tying issuer to World Bank Group identity.
Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 18: International Economic Institutions > Important Facts > p. 523
Presence: 5/5
“• The term 'World Bank' generally refers to IBRD and IDA as they have the same head and management, while the term 'World Bank Group' refers to a group of five institutions, namely • 1. International Bank for Reconstruction and Development (IBRD) • 2. International Development Association (IDA) • 3. International Finance Corporation (IFC) • 4. Multilateral Investment Guarantee Agency (MIGA) • 5.”
Why this source?
  • Lists IFC as one of the five institutions that constitute the 'World Bank Group'.
  • Distinguishes World Bank (IBRD/IDA) and World Bank Group membership, confirming IFC's institutional placement.
Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 9: Agriculture > 8.28 Indian Economy > p. 284
Presence: 4/5
“• Municipal Bond fixed income instrument, i.e. debt securities issued by the government or semi-government institutions which need funding for civic projects - two types of municipal bonds - General Obligation Bonds and Revenue Bonds.• Masala Bond rupee-denominated bond can be issued by governmental bodies, NBFCs and eligible corporates to raise money from overseas markets - first Masala Bond was issued by International Finance Corporation (IFC) in 2014.”
Why this source?
  • States that the first Masala Bond was issued by the International Finance Corporation (IFC) in 2014, confirming IFC as issuer.
  • Supports the factual link between IFC and 'IFC Masala Bonds', reinforcing the issuer claim in the statement.
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