Indian Company’s ECB Jumps 19 Percent to USD 23.28 Billion in 9M FY22

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India-Inc’s-overseas-borrowing-jumps-19-per-cent-to-$23

According to the Reserve Bank of India (RBI) data, the overseas borrowings of Indian companies stood at USD 23.28 billion in the first 3 quarters of the FY22 (April, 2021 -December, 2021) as against USD 19.53 billion during FY21 (April-December, 2020) and had jumped over 19 percent in the first nine months of the current fiscal (9MFY22).

Highlights:

i.ECBs for the on-lending or sub-lending in the 1st 9MFY22 (April 2021 to December 2021) stood at USD 6.72 billion which was higher than USD 6.67 billion raised by the non-banking lenders in FY21.

ii.ECBs for refinancing of rupee loans (USD 3.70 billion), modernisation (USD 1.67 billion), capital goods Import (USD 1.54 billion) and rupee expenditure (USD 976 million) in 1st 9MFY22 have exceeded the entire FY20.

About Growth:

i.The total credit growth of Banks and Non-Banking Financial Companies (NBFCs) will improve by 9 percent to 11 percent in fiscal 2023 with the broad-based recovery in the economy and support of both retail and wholesale verticals.

ii.The current increase in overseas borrowing is mainly due to low interest rate advantage and it would taper down once the United States Federal Reserve (US Fed Reserve) raises the rate. 

  • The growth happens when domestic companies interest increases towards low-cost overseas funds amid pick up in economic activity and forthcoming interest rate hike by the (US Fed Reserve).

About External Commercial Borrowings (ECB):

An external commercial borrowing (ECB) refers to the loans taken from non-resident lenders i.e. the foreign companies with a minimum average maturity (3 years) which can be availed through the automatic or the approval route.

  • ECBs include commercial bank loans, buyers’ credit, suppliers’ credit, securitized instruments such as floating rate notes and fixed rate bonds etc,.

Recent related news:

The Reserve Bank of India (RBI) has issued two draft documents viz, Foreign Exchange Management (FEM) (Non-debt Instruments – Overseas Investment (OI)) Rules, 2021 and FEM (OI) Regulations, 2021 by rationalising the existing provisions that are governing overseas investment.

About Reserve Bank of India (RBI):

Establishment – 1st April 1935
Headquarters – Mumbai, Maharashtra
Governor – Shaktikanta Das
Deputy Governors – Mahesh Kumar Jain, Michael Debabrata Patra, M. Rajeshwar Rao, T. Rabi Sankar

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