Net ECB inflows more than double in Apr-Feb; highest in at least 5 years

Net inflows through external commercial borrowing (ECB) more than doubled to $20.3 billion in the period April last year to February this year over the same duration a year earlier, partly driven by a decline in the cost of overseas funds.

 

The inflows were the highest in at least five years.

 

Net inflows during April 2023-February 2024 stood at $8.8 billion, according to the Reserve Bank of India (RBI) data.

 

In February this year, net inflows were $1.9 billion, up from $1.3 billion in the same month last year.

 

On a cumulative basis, ECB registrations ($50.1 billion) and disbursements ($46.1 billion) during April 2024-February 2025 were higher than those recorded during the same period last year by $8.6 billion and $13.4 billion, respectively.

 

Soumyajit Niyogi, director, India Ratings & Research, told Business Standard the overall lending rate was down 40-50 basis points (bps) over April last year.

 

There were also expectations of further rate cuts in the United States (US). Most of the ECB is linked to the six-month to one-year benchmark rate.

 

According to the article “State of Economy” in the RBI’s bulletin (April 2025),  the overall cost of registered ECB declined by 35 bps during the year, driven by a reduction in both the global benchmark interest rates — the secured overnight financing rate (SOFR) and the weighted average interest margin (WAIM). 

 

In April 2023-February 2024, global benchmark rates such as the SOFR had stabilised, albeit at elevated levels.

 

The WAIM, however, moved in a wider range of 0.83-1.98 per cent over the benchmark rates since July 2023 relative to the benchmark rates.

 

The conditions in global markets changed after Donald Trump became American President in January and the policy announcements by his administration.

 

Niyogi said rate cut expectations in the US had significantly diminished because of tariffs. And on the contrary, in India such expectations have increased. This is not something favourable for ECB borrowers. If they want to have a lower rate, they will tap the domestic market. 

 

Second, given the ongoing tariff war, there is a lot of uncertainty which impacts the currency.

 

“Two things put together we don’t expect a further increase in ECB borrowing. We are expecting moderate ECB borrowing this financial year,” he added.

 

An analysis of the end use of registered ECB shows fund raising for the import/local sourcing of capital goods amounted to $3.9 billion in April 2024-February 2025, down from $10.7 billion a year earlier.

 

Funds for modernisation, new projects, and infrastructure amounted to $7.4 billion as against $11.2 billion a year before, and on-lending/sub-lending was $10.8 billion, up from $ 6.6 billion a year ago.

 

The refinancing of old ECB and rupee loans was $9.7 billion, up from $ 5.4 billion.