An analysis of the implications of ECBs for the Indian economy

Abstract

External commercial borrowings are instruments allowed in India for Indian corporates and public sector industries to borrow funds from abroad. Given the very low interest rate prevalent in Europe, ECBs have gained a considerable prominence among capital-intensive industries in India. ECBs can be availed through automatic approval route and special approval route. The instruments are heavily monitored and regulated by RBI. Investments in speculative markets such as stocks or real estate are not allowed. The intended end use of ECBs is to invest in productive ventures. Over a period of 10 years RBI has reworked its regulatory methods as when it needed.