RBI shows easier ECBs but firms may not bite

ECBs could avert funding stress in Q4, as domestic liquidity has tightened

- Anshika Kayastha & Subhana Shaikh

Sweeping relaxations by the Reserve Bank of India (RBI) on rules for Indian companies to borrow overseas may not trigger an immediate surge in such loans, as cheaper local loans and high hedging expenses dull the appeal of external commercial borrowings (ECBs).

The central bank earlier this month raised the amount corporates can borrow, scrapped cost caps on external commercial borrowings rates, and eased restrictions on how the funds can be used.

The draft aims to simplify accessing the overseas market, proposing measures like higher per-tranche limits and greater currency flexibility, including the conversion of rupee bonds to foreign currency and vice versa.

External commercial borrowings are foreign-currency or rupee-denominated loans raised from nonresident lenders.