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 codes given below:

Both statements hold, so C is correct. Masala bonds are rupee-denominated bonds issued in overseas markets, and the IFC issued the first one in 2014 to raise Rs 1,000 crore from foreign investors. The money goes to Indian infrastructure and private sector projects.

• Statement 1 is correct: IFC is one of the five institutions of the World Bank Group. It is legally a separate entity with its own capital, but it is widely described as an arm of the World Bank Group.
• Statement 2 is correct: Masala bonds are denominated in rupees, so the currency risk sits with the investor, not the issuer. They are a debt route for both public and private borrowers, though IFC's own issues mainly fund private projects.

The core concept is external commercial borrowing in rupees, which links to the Mains theme of capital account management and rupee internationalisation. RBI's 2019 framework changed how such rupee bonds are regulated, and later issuance slowed, so check the current rules before using this in answers.

Trap: Students reject statement 1 because IFC is a separate legal body. UPSC treats it as part of the World Bank Group, so the answer is C.