Prelims · Economy & social development · 31 questions

Capital markets, insurance & financial instruments

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Prelims 2016 · Q8

Medium

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.

Answer & explanation

Answer: (c) Both 1 and 2

Masala bonds were first issued in November 2014 by the International Finance Corporation (IFC), the private-sector lending member of the World Bank Group, as offshore bonds denominated in Indian rupees. In September 2015 RBI opened the same route to any Indian corporate or body corporate, so rupee bonds sold abroad became a debt-raising tool for both public and private companies.

✓ 1. IFC is a member of the World Bank Group; its first Masala bonds were 10-year offshore rupee bonds listed on the London Stock Exchange.
✓ 2. The bonds are denominated in rupees, so the currency risk lies with the foreign investor. RBI's framework of 29 September 2015 lets any corporate or body corporate issue them, public or private, as borrowing within ECB policy.

Remember · Masala bond = rupee-denominated bond issued abroad; first issuer IFC (World Bank Group), Nov 2014; RBI framework Sept 2015 under ECB; exchange-rate risk borne by the investor.

Sources

Indian Economic Service, Arthapedia: Masala Bonds ↗ “"Masala Bonds" are the 10 year off-shore rupee bonds issued by International Finance Corporation (IFC) , a member of the World Bank group, in the international capital market in November 2014”
RBI, A.P. (DIR Series) Circular No. 17: Issuance of Rupee denominated bonds overseas (29 September 2015) ↗ “Eligible borrowers: Any corporate or body corporate as well as Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).”

Question and answer: UPSC's official GS Paper I (2016, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink ·

Prelims 2016 · Q71

Easy

What is/are the purpose/purposes of Government's 'Sovereign Gold Bond Scheme' and 'Gold Monetization Scheme'?

1.To bring the idle gold lying with Indian households into the economy
2.To promote FDI in the gold and jewellery sector
3.To reduce India's dependence on gold imports

Select the correct answer using the code given below.

Answer & explanation

Answer: (c) 1 and 3 only

Both schemes, introduced in 2015, aim to bring gold held by Indian households into productive use and to cut the country's need to import gold. Neither is meant to attract foreign direct investment into the gold or jewellery trade.

✓ 1. The Gold Monetisation Scheme is meant to mobilise idle gold held by households and institutions and put it to productive use; the Sovereign Gold Bond gives savers a paper substitute for buying physical gold.
✗ 2. Neither scheme deals with FDI. They are about domestic gold holdings and gold bonds issued by the Government (through the RBI), not about foreign investment in gold or jewellery.
✓ 3. Since most gold demand is met by imports, shifting demand from physical gold to bonds, and putting household gold back into circulation, reduces import dependence and helps keep the current account deficit in check.
• Since then The Medium and Long Term Gold Deposit components of the Gold Monetisation Scheme were discontinued from 26 March 2025 (Department of Economic Affairs, Ministry of Finance). The answer as it stood in 2016 is unchanged.

Remember · Sovereign Gold Bond and Gold Monetisation Scheme (2015): mobilise household gold and cut gold imports; they are not FDI schemes.