External Commercial Borrowings (ECBs) of India Inc more than doubled, on a quarter-on-quarter (QoQ) basis, to $8.98 billion in the second quarter primarily driven by overseas fund raising by Reliance Industries, which accounted for about $4.66 billion or 50 per cent of the total borrowing during the quarter.

Overseas borrowings of Indian corporates had plunged to an 11-quarter low of $3.51 billion in the first quarter when the pandemic-led lockdown brought both economic and lending activities to a virtual standstill for close to two months.

While the monthly ECB fund raise dipped to a low of $0.9 billion in April, it improved to reach $2.14 billion in July and touched $5.22 billion in September. However, the spike in September is purely on account of RIL’s overseas fund raise, which accounted for 85 per cent of the overall borrowings during the month.

On a half-yearly basis, ECBs nearly halved to $12.48 billion as against $25.16 billion during the same period in the previous fiscal. It has touched the peak of $26.54 billion in the second-half of FY20.

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Preferred funding route

ECBs have been one of the preferred routes of fund raising in the last few years as the domestic debt market became more risk averse post IL&FS crisis and a series of high-profile default by leading NBFCs.

In addition, RBI’s rationalisation measures allowing more sectors to tap overseas markets, cheaper interest rates and surplus liquidity in the overseas market also fuelled this growth resulting in India Inc’s overseas borrowing touching a historic high of $51.71 billion in FY20.

However, ECBs are not expected to outpace the previous year’s growth trend in the current fiscal as many firms are embracing cost saving measures and cutting down on their capital expenditure and expansion plans due to the pandemic-led business uncertainty.

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