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What is the story about?
Indian companies raised $2.21 billion through external commercial borrowings (ECBs) in October, marking the fourth straight month of decline, even as a weakening rupee complicates overseas fundraising decisions.
Data released by the Reserve Bank of India (RBI) on Thursday showed ECB inflows eased from $2.80 billion in September, $3.27 billion in August, and $3.32 billion in July, underscoring a gradual cooling in offshore borrowing appetite.
Of the October total, $1.92 billion was raised through the automatic route, with Agratas Energy Storage Solutions Pvt. Ltd. emerging as the largest borrower. The electrical equipment manufacturer raised $525 million, primarily to finance the import of capital goods, according to RBI data.
Borrowings via the approval route stood at $290.42 million, with only two entities tapping overseas markets during the month—Power Finance Corp. Ltd. and InterGlobe Aviation Ltd., the operator of IndiGo.
Rupee weakness weighs on borrowing decisions
The moderation in ECB activity comes against the backdrop of a steadily depreciating rupee, which has been hovering near record lows against the US dollar. A weaker currency raises the effective cost of servicing foreign currency debt, especially for companies without natural dollar hedges such as export revenues.
Market participants say this has prompted many Indian firms to turn cautious on fresh dollar borrowings, delay fund-raising plans, or opt for shorter tenures and higher hedge cover, even if overseas rates appear attractive at first glance.
“ECB borrowing is no longer a straightforward arbitrage play,” said a treasury official at a large manufacturing firm. “With the rupee under pressure, the hedge cost can wipe out any interest rate advantage.”
Shift in external funding strategy
The trend also reflects a broader shift in external borrowing behaviour. Companies with dollar-linked cash flows—such as exporters, infrastructure firms with long-term visibility, and capital goods importers—continue to access ECBs selectively. Others are increasingly leaning on domestic bond markets, bank loans, or internal accruals, where currency risk is absent.
Policy measures taken over the past year—such as flexibility in end-use norms and all-in-cost ceilings—have kept the ECB framework supportive. However, currency volatility has emerged as the dominant variable shaping borrowing decisions.
Analysts expect ECB flows to remain measured in the near term, unless the rupee stabilises or global financial conditions ease meaningfully. For now, India Inc.’s offshore borrowing playbook appears to be shifting from aggressive expansion to defensive, need-based funding.
Data released by the Reserve Bank of India (RBI) on Thursday showed ECB inflows eased from $2.80 billion in September, $3.27 billion in August, and $3.32 billion in July, underscoring a gradual cooling in offshore borrowing appetite.
Of the October total, $1.92 billion was raised through the automatic route, with Agratas Energy Storage Solutions Pvt. Ltd. emerging as the largest borrower. The electrical equipment manufacturer raised $525 million, primarily to finance the import of capital goods, according to RBI data.
Borrowings via the approval route stood at $290.42 million, with only two entities tapping overseas markets during the month—Power Finance Corp. Ltd. and InterGlobe Aviation Ltd., the operator of IndiGo.
Rupee weakness weighs on borrowing decisions
The moderation in ECB activity comes against the backdrop of a steadily depreciating rupee, which has been hovering near record lows against the US dollar. A weaker currency raises the effective cost of servicing foreign currency debt, especially for companies without natural dollar hedges such as export revenues.
Market participants say this has prompted many Indian firms to turn cautious on fresh dollar borrowings, delay fund-raising plans, or opt for shorter tenures and higher hedge cover, even if overseas rates appear attractive at first glance.
“ECB borrowing is no longer a straightforward arbitrage play,” said a treasury official at a large manufacturing firm. “With the rupee under pressure, the hedge cost can wipe out any interest rate advantage.”
Shift in external funding strategy
The trend also reflects a broader shift in external borrowing behaviour. Companies with dollar-linked cash flows—such as exporters, infrastructure firms with long-term visibility, and capital goods importers—continue to access ECBs selectively. Others are increasingly leaning on domestic bond markets, bank loans, or internal accruals, where currency risk is absent.
Policy measures taken over the past year—such as flexibility in end-use norms and all-in-cost ceilings—have kept the ECB framework supportive. However, currency volatility has emerged as the dominant variable shaping borrowing decisions.
Analysts expect ECB flows to remain measured in the near term, unless the rupee stabilises or global financial conditions ease meaningfully. For now, India Inc.’s offshore borrowing playbook appears to be shifting from aggressive expansion to defensive, need-based funding.
