External Commercial Borrowing and Its Regulations

India always promotes capital inflows as an element of the growth plan. The need for domestic capital and shortage in the current account forced the government in the past to go for foreign capital. Hence, foreign capital is money obtained from foreign countries to invest locally.

Foreign capital is not of the same kind as there are different types of foreign capital. The primary category is foreign investment including FDI (Foreign Direct Investment) and FPI (Foreign Portfolio Investment). Likewise, there are other types of foreign capital which include trade credit, NRI Deposits and the most important one for India – the ECB.

What is External Commercial Borrowing?

External commercial borrowing (ECB) is loans in India made by non-resident lenders in foreign currency to Indian borrowers.  They are used generally in India to ease access to foreign money by Indian corporations and PSUs (public sector undertakings).