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As per the new norms issued by the Reserve Bank of India, Masala bonds are required to have a minimum maturity of 3 years which is to be extended to 5 years if the issuer intends to sell them for a sum greater than $50 Million. The RBI has also capped the coupon rates to a maximum of 300 bps above the country’s sovereign bonds for similar maturities. RBI has also said that the investors should not be related to the bond issuers and plans to examine all Masala bond issuance in the future.

These regulations will restrict the market to high quality issuers which are able to price their offering below the pricing cap.

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