Write the rules governing ECBS.
Ans. External Commercial Borrowings are borrowings raised from the international markets by corporates. These overseas borrowings are governed by an ECB policy which is administered by the finance ministry along with the RBI. Indian companies can access funds on a first-come- first-serve basis within an overall limit set in the ECB guidelines. External Commercial Borrowings supplement domestically available resources for expansion of existing capacity as well as for fresh investment. Indian companies have preferred this route to raise funds, as the cost of borrowing is low in the international markets. ECBS need sound risk management-both interest rate and forex risk. Any default has wider repercussions in terms of increasing the risk premium for the subsequent borrowers from India.
ECBS are a key component of India's overall external debt which includes external assistance, buyers' credit, suppliers' credit, NRI deposits, short-term credit and rupee debt.
0 Comments