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  • External commercial borrowing (ECBs) are loans in India made by non-resident lenders in foreign currency to Indian borrowers.
  • They are used widely in India to facilitate access to foreign money by Indian corporations and PSUs (public sector undertakings).
  • ECBs include
    • Commercial bank loans,
    • Buyers credit,
    • Suppliers credit,
    • Securitized instruments such as floating rate notes and fixed rate bonds etc.,
    • Credit from official export credit agencies and
    • Commercial borrowings from the private sector window of multilateral financial Institutions such as International Finance Corporation (Washington), ADB, AFIC, CDC, etc.
  • ECBs cannot be used for investment in stock market or speculation in real estate.
  • The DEA (Department of Economic Affairs), Ministry of Finance, Government of India along with Reserve Bank of India, monitors and regulates ECB guidelines and policies.
  • Infrastructure and Greenfield projects, funding up to 50% (through ECB) is allowed.
  • Telecom sector upto 50% funding through ECBs is allowed.
  • Government of India allowed borrowings in Chinese Yuan.
  • Corporate sectors can mobilize USD 750 million via automatic route, whereas service sectors and NGO’s for microfinance can mobilize USD 200 million and 10 million respectively.
  • Borrowers can use 25 per cent of the ECB to repay rupee debt and the remaining 75 per cent should be used for new projects.
  • A borrower cannot refinance its entire existing rupee loan through ECB.
  • The money raised through ECB is cheaper given near-zero interest rates in the US and Europe, Indian companies can repay part of their existing expensive loans from that.