Rising interest rates and the weakening of the rupee against the dollar will dampen the attractiveness of external commercial borrowings (ECBs), which have become an important source of financing for India Inc.
ECBs account for over one-third of external debt, as of end-December last year. In fact, ECBs got a boost after the Reserve Bank of India introduced the new framework in January 2019 followed by easing of restrictions on working capital, general corporate purpose and repayment of rupee loans.
ECBs had sharply moderated in April, to just $312 million, from over $5 billion in March. In such a scenario, companies may have to look at domestic borrowing.