Cheaper access to foreign funds compared to the domestic market has led Indian firms, especially financial services companies, to increasingly tap overseas markets for their funding needs over the past 2 to 3 months. Even Piramal Finance, which enjoys an AA paper rating, saved 30 basis points (bps) on its recent $400 million overseas fundraising.
Jairam Sridharan, MD & CEO of Piramal Finance, said that despite fully hedging currency risks, overseas borrowing currently offers a cost advantage. “From a landed price perspective, even after taking into account additional costs like hedging, international borrowing is working out to be better for us. Compared to domestic borrowing, we are saving about 30 basis points right now,” he added.
“The RBI’s buy-sell swaps have lowered forward rates, boosting ECB appeal,” said Shailendra Jhingan, Head Treasury & Economic Research, ICICI Bank. He believes it (ECB) has now become attractive for NBFCs/corporates to access, as the cost of borrowing is comparable to the cost of raising funds in the domestic market. “The activity in ECBs is likely to pick up as low forward rates are attractive. With expected US Fed cuts, ECB borrowing looks attractive up to three years,” Jhingan added.
Agreeing with him, Nand Gopal Anand, Partner, JSA Advocates & Solicitors, added, “For Q4, we are receiving queries from clients on NBFC ECB borrowing transactions, and we expect that Q4 will witness an even higher number of ECB financings by NBFCs and financial institutions, given the financial year closure.”
Meanwhile, in December 2025, the financial companies accounted for half of the total ($4.4 billion) ECB borrowing, raising $2.2 billion through the ECB route, sharply higher than $540.6 million raised a month ago, according to the Reserve Bank of India.
Transmission Gap
The shift is also largely driven by the dynamics of interest rate transmission in India. While the Reserve Bank of India (RBI) has cut policy rates by 125 bps over the past year, it reported that 95 basis points have been transmitted across the system. However, for AA-rated borrowers like Piramal Finance, the effective transmission has been far weaker. “We are seeing barely 25% of the 125 basis points in terms of transmission. So effectively, the benefit of lower rates is not reaching us fully,” Sridharan added. However, he emphasised that the move is opportunistic rather than structural. “Sometimes domestic borrowing is cheaper, sometimes international. Right now, opportunistically, international has been good, so we have tapped it,” he added.
In fact, Piramal Finance had relied entirely on domestic borrowing in the first six months of the year, but shifted to overseas markets in the last quarter as conditions changed. Sridharan stated that over the next 2-3 years, they expect to raise 18-20% of their borrowings from international markets.
Tactical Shifts
Market participants also added that heavy government borrowing has kept domestic bond yields elevated despite monetary easing, making local funding expensive and boosting overseas borrowing. In the last two months, the 10-year G-Sec yield has hardened by 20 bps to 6.71%. Despite a 125 bps cut in repo rates in the last year, the 10-year G-Sec has been flat.
“Credit spreads are at their tightest levels over the past year,” added Debadatta Chand, managing director & CEO of Bank of Baroda, who is also expected to borrow around $500 million.
Meanwhile, the capital raised was mostly for on-lending and not for refinancing, which suggests they were getting a better overall cost, analysts said. Some analysts also pointed out that by the end of December 2025, there was a slight reduction in US yields, which may have contributed to the jump.
With the RBI taking liberalisation measures to encourage Indian companies to borrow ECB loans, and the broader trend of Indian financial services firms becoming more agile in their funding strategies, balancing domestic and overseas options depending on rate cycles, transmission efficiency, and hedging costs. Anand said, “If we can see stability in the global interest rates and foreign exchange prices, we may witness the momentum built in Q3 and Q4 to sustain through FY27.”