State-owned enterprises are likely to step up overseas borrowings this year to capitalise on a roughly 3 per cent funding-cost advantage offered under the Reserve Bank of India’s (RBI’s) latest measures, with external commercial borrowing (ECB) issuances potentially crossing $15 billion.
Public sector enterprises, which typically raise $10-12 billion annually through ECBs, are expected to advance borrowing plans and tap global markets more aggressively while the window remains favourable.
Last week, the RBI and the government announced a raft of measures aimed at attracting foreign capital inflows. These include a subsidised window for non-resident Indian (NRI) deposits, under which the RBI will bear the full hedging cost on fresh three-five-year deposits mobilised by banks until September 2026, and a concessional forex swap facility to encourage public sector enterprises to raise ECBs until September 30, 2026.
“The PSU ECB swap facility will offer further incentives to PSUs to borrow in USD (ECB) and swap into INR, similar to the 2013 RBI FX swap window,” Barclays said in a report. “This may see an uptake of around $10-15 billion over the next few months, but demand will still be constrained by the fact that global rates are still elevated,” it said.
According to a senior banker at a state-owned bank, state-owned enterprises, particularly central public sector enterprises (CPSEs), typically raise around $10-12 billion annually through ECBs. Given the current window of opportunity and the roughly 3 per cent cost advantage available, many of them are expected to front-load their borrowing plans and potentially raise funds earmarked for projects scheduled for next year as well.
“The benefit accrues directly to the borrowing entities rather than to banks, making ECB funding especially attractive at this point. Since the hedging aspect is being addressed, these funds can be deployed effectively in the domestic market.
“As a result, ECB issuances could exceed the usual annual run rate of $10-12 billion. While it is too early to provide a firm estimate and much will depend on the detailed finance ministry and regulatory guidelines, a reasonable expectation is that ECB fundraising could reach around $15 billion, or even somewhat higher, if the current incentives remain in place,” he said.
SBI Research, in a report, said the concessional forex swap facility to incentivise ECB issuances by public sector units (PSUs) should accelerate such borrowings in overseas markets, helping them access funds at competitive net pricing and reversing the decline in total ECB/FCCB flows, which fell by around 30 per cent in FY26 to $42.9 billion from $61.2 billion in FY25.
Some of the major PSUs that have recently raised ECBs include PFC, REC, EXIM Bank, IOC, NaBFID and NTPC. Such borrowings amounted to $4.9 billion in FY26, accounting for around 11 per cent of total ECB issuances during the year, with most carrying maturities of five to seven years.
“Concessional forex swap to incentivise ECB issuances by PSUs (till 30th Sep) should be counter-intuitive to crowding-in of raising resources by better-rated corporates locally, giving a breather to domestic capital markets that have seen yields detaching from policy rates and also enable better visibility to marquee names from India Inc overseas as they entrench themselves in liquid global financial markets,” the SBI report said.
According to an IDFC First Bank report, while the details of the scheme are yet to be released, it is expected to attract inflows, assuming a significant discount on forex swaps.
“Currently, bank credit remains the main channel of funding in the economy, amid a reduction in non-bank funding sources such as foreign capital inflows, including FDI and ECBs, as well as corporate bond issuance. The capital inflow measures are expected to ease pressure on bank credit and boost non-bank sources of funding. While FCNR(B) deposits will support bank deposit growth, ECB inflows could help reduce dependence on bank credit,” the report said.
According to data from Bloomberg, Indian companies raised a record $61.2 billion through ECBs in FY25, marking a sharp increase from $49.2 billion in FY24 and nearly double the $26.6 billion raised in FY23. The surge in overseas fundraising came amid strong credit demand and favourable access to global capital markets.
ECB issuances stood at $35.3 billion in FY21 and $39.9 billion in FY22 before moderating in FY23. In FY26, Indian firms raised $43 billion through ECBs. While lower than the record level seen in FY25, the amount remained significantly above the levels recorded in FY21, FY22 and FY23, underscoring continued appetite among corporates for overseas funding.
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