Indian companies have slowed down their fund raising through external commercial borrowings (ECBs) amid higher hedging costs, said experts. Registrations by Indian firms for ECBs dropped to $2.2 billion in October, the lowest in 23 months, as per the Reserve Bank of India (RBI) data released on Thursday.
On a monthly basis, the filings were down 21.4%. Filings for ECBs have declined steadily since June, when companies sought to raise $3.5 billion.
“ECB activity has slowed amid elevated currency risks. Persistent depreciation pressure on the local currency has pushed up hedging costs, making overseas borrowings less attractive. Geopolitical uncertainty further dampens appetite—tariff-related risks cloud export visibility, weakening the reliability of natural hedges,” said Soumyajit Niyogi, director – India Ratings & Research. The currency has been under pressure for a while now on account of the absence of a trade deal and persistent outflows. So far in FY26, the rupee has fallen 5.6%, the worst in three years.
Currency Conundrum
Sanjay Agarwal, senior director at CARE Ratings Ltd, said, “Another factor is benign domestic rates, which—combined with elevated hedging costs—make ECBs more expensive than local borrowings. Large corporates now favour cheaper EBLR loans post-rate cuts. Moreover, subdued private capex leads to muted overall borrowing demand.”
Of the total filings in October, $1.92 billion was through the automatic route and the rest, $ 290.4 million was through the approval route. Power Finance Corporation Ltd and Interglobe Aviation Ltd were the entities filed through the approval route, the data showed. Non-banking lenders such as Muthoot Finance and Sammaan Capital filed to raise $ 150 million and $ 450 million through the automatic route, respectively.
Regulatory Pivot
Experts said that a revival is likely once currency pressures ease. “Stability on FX and the recently announced guidelines should provide support to a pickup in overseas borrowing,” said Niyogi.
The RBI in October proposed a new framework for ECBs that links corporate foreign debt limits to financial strength and scrapped cost caps. Under this, a company can raise ECBs up to $1 billion or 300% of its net-worth as per the last audited balance sheet, whichever is higher from the earlier limit of $750 million. It has also simplified end-use restrictions and minimum average maturity requirements.