Why in the news
Net inflows from external commercial borrowing (ECB) climbed to a multi-year high in FY25 as foreign funds became cheaper, though trade tensions cloud the outlook.
Key facts
- Net inflows: $20.3 billion, more than twice the earlier $8.8 billion.
- Drivers: overall overseas lending rates lower by 40-50 bps, and expectations of further US rate cuts, since much ECB is tied to six-month to one-year benchmarks.
- Registered ECB cost fell by 35 bps as global benchmarks such as SOFR eased.
April 2024 to February 2025
| Measure | Amount | Change from previous year |
|---|
| ECB registrations | $50.1 billion | Up $8.6 billion |
| ECB disbursements | $46.1 billion | Up $13.4 billion |
Flow trend
| Year | Net flow |
|---|
| FY21 | $0.2 billion |
| FY22 | $7.7 billion |
| FY23 | Below $0.5 billion |
| FY24 | $9.5 billion |
| FY25 (to Feb 2025) | $20.3 billion |
Concerns and outlook
- Hopes of US rate cuts faded because of tariffs and policy changes under the Trump administration, while rate cut expectations in India grew.
- The tariff war and currency uncertainty could curb further borrowing.
- Borrowing is likely to stay moderate in the coming financial year.
Exam angle
- ECB means loans raised by Indian firms from overseas lenders.
- Benchmark mentioned: SOFR.
- Peak inflow: $20.3 billion in FY25.