Fundraising via overseas bonds plunges amid global turmoil

Overseas bond fundraising by Indian firms drops 43% in FY26 to $4.9 billion as geopolitical turmoil, rupee depreciation and rising hedging costs dampen appetite.

Written by Christina Titus

April 7, 2026 19:48 IST

Indian companies scale back overseas borrowing amid volatile rupee and high global rates, with firms adopting a wait-and-watch approach on foreign debt markets.

Indian companies have significantly scaled down their overseas debt borrowing in FY26 as geopolitical uncertainties drove up hedging costs. Indian companies raised $4.9 billion through overseas bonds, down 43% from $7 billion in FY25, data from Primedatabase showed.

The year saw external shocks starting from the US President Donald Trump’s tariff tantrums to the Middle East crisis now. The consistent geopolitical uncertainties raised hedging costs, prompting borrowers to cut back on overseas borrowing.

“Expectations of falling global yields in 2025 did not pan out—Fed cuts were minimal, keeping yields sticky. Combined with year-long rupee volatility and depreciation, plus elevated global rates, large borrowers slowed overseas borrowing,” said Soumyajit Niyogi, director, India Ratings & Research.

The Rupee drop

The rupee plunged 10.96% in FY26 to 94.83 against the dollar—its sharpest drop in 14 years—making it Asia’s worst-performing currency. The rupee fell 4.24% in March alone following the war. However, the currency bounced back to 92 following the RBI’s measures, including capping banks’ forex position limit at $100 million.

Market participants said sustaining at these levels will be a challenge if the war persists. The rupee ended at 93 against the dollar on Tuesday, according to Bloomberg.

“The all-in cost of borrowing abroad is no longer meaningfully lower than raising funds in India. This is because of higher base rates abroad and hedging costs,” said Pranav Haldea, managing director, Prime Database Group.

Many companies and non-bank lenders are still deferring or scaling back their plans for overseas borrowing as the West Asia pushed up the hedging cost further. For non-banking finance companies, overseas markets offered a key avenue to diversify funding sources.

“The rupee’s depreciation has driven hedging costs up by 40-50 basis points since the war began, significantly raising the expense of overseas borrowing. Therefore, we are holding back our plans to tap overseas market currently,” said a senior official at a housing finance company.

Market participants remain in wait-and-watch mode, eyeing further developments. Niyogi said that overseas borrowing could pick up if currency outlooks turn constructive and geopolitics situations stabilise.

This article was first uploaded on April seven, twenty twenty-six, at forty-eight minutes past seven in the evening.