THIRUVANANTHAPURAM: KIIFB denies the allegation that Masala bonds have a higher interest rate. The interest of the bonds should not be calculated in the value of US dollars. The board has clarified that interest rate should be determined only after converting the bond’s value to Indian rupee.

When KIIFB undertook tender, the rate received was 10.15%. Andhra Pradesh Capital Regional Development Authority was able to fetch an interest rate of 10.72%. Meanwhile, KIIFB collected money via masala bonds at an interest rate of 9.723%. But the question here is other financial institutions in the country have raised bonds from external markets abroad at an interest rate much lower than 9% but the board writes off such criticisms saying that they are based on unawareness on masala bonds.

Board officials say such criticisms are based on incomplete information, as the bonds in US dollars should be converted to masala bonds which are based on the Indian rupee, before determining the interest rates. Otherwise, it will amount to comparing apples with oranges whereas in reality apple could only be compared to apple.

When the current interest rates of KIIFB’s masala bonds, which is 9.723% is converted to US dollars, it would amount to just 4.68%. “Even if it is calculated, in either way, KIIFB capitalised foreign funds from external markets abroad at the lowest interest rates of that time.” the board said on its Facebook page.