New Delhi, June 20:
External commercial borrowing (ECB) inflows are expected to recover in FY27, supported by RBI measures to attract foreign capital, according to a Bank of Baroda (BoB) report.
External commercial borrowings (ECBs) serve as an additional source of financing for domestic companies. Over the years, ECB trends have been influenced by a number of factors such as the availability of domestic funding, demand for capital, global interest rates, and movements in the exchange rate.
According to the BoB report, India’s ECB registrations (including FCCBs) declined to USD 42.9 billion in FY26 from USD 61.2 billion in FY25 due to sharp Rupee depreciation, which further led to higher hedging costs and narrowing rate differentials with the US, as per the report.
Currency volatility, specifically the rapid decline in the value of the domestic exchange rate, was an important factor, as per the report. “In FY26, INR depreciated by 4.3% based on the yearly average, compared with a decline of 2.1% in FY25,” it said. Additionally, the decline was much sharper at 9.9 per cent this year, compared with 2.4 per cent in FY25.
It further noted, a key factor behind the decline in ECB registrations in FY26 was lower overseas borrowing by NBFCs, which remained the largest borrowers in the market. ECB borrowings by NBFCs fell to USD 16.8 billion from USD 27.3 billion a year ago, largely driving the overall decline in ECB registrations. The report further noted ECB registrations by NBFCs totalled “USD 16.8 billion in FY26, as against USD 27.3 billion in FY25” in absolute terms, “which largely explains the decline in total ECB registrations”.
Additionally, “ECB registrations by the manufacturing sector almost halved to USD 7.3bn in FY26 compared with USD 13.9bn in FY25.”