NEWS
28 JANUARY 2025
Daily Current Affairs based on ‘The Hindu’ newspaper as per the syllabus of UPSC Civil Services Examination (Prelims and Mains) Compiled by Mrs. Bilquees Khatri.
GS III: ECONOMY
External Commercial Borrowings (ECB) Landscape
Recent Developments:
- India’s investment ecosystem and ECBs have evolved significantly.
- SBI report highlights investment trends, private sector roles, and ECB impact on corporate financing.
- Household Net Financial Savings (HNFS) rose to 5.3% of GDP in FY24 (from 5.0% in FY23).
What are ECBs?
- Commercial loans raised by Indian entities from foreign sources.
- Governed by RBI guidelines on maturity, usage, and cost ceilings.
SBI Report (Sep 2024):
- Total outstanding ECBs: $190.4 billion.
- Non-Rupee & Non-FDI ECBs: $154.9 billion.
- Private sector share: 63% ($97.58B); Public sector: 37% ($55.5B).
- 74% of private ECBs are hedged.
Need for ECBs:
- Lower interest rates than domestic loans.
- Fills infrastructure gap and funds corporate expansion.
- Diversifies funding sources and supports export industries.
Risks & Limitations:
- Currency risk from exchange rate fluctuations.
- Interest rate volatility tied to global benchmarks.
- Regulatory restrictions and repayment challenges.
Way Forward:
- ECBs can drive infrastructure, technology, and export growth.
- Companies must assess risks and financial sustainability before borrowing.