External Commercial Borrowings (ECBs)

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The decline in the net inflows of External Commercial Borrowings (ECBs) between the year 1997-98 and 1996-97 has not been much. The net inflows of External Commercial Borrowings in the year 1997-98 were USD 3,999 million whereas, the same during 1996-97 was USD 2.848 million. The amount of expenditure as was accounted for in the year 1997-98 was USD 7.371 million, which was lower than USD 7,571 million as has been calculated in the year 1996-97. The External Commercial Borrowings (ECBs) approvals calculated for the year 1997-98 stood at USD 8,712 million, which was apparently higher than that of in the year 1996-97.

Functionalities of External Commercial Borrowings (ECBs)-

The highest approvals of External Commercial Borrowings (ECBs) in terms of sectoral allocation have been USD 1.5 billion, especially in the telecom sector. The ECBs approvals for the year 1998-99 stood at USD 3,804 million. There has been a steep decline in the ECB disbursements in corporate sector and it stood at USD 1.6 billion which excludes, USD 4.2 billion on account of RIBs in the first two quarters of the year 1998- 99 as compared to the ECB disbursements of the year 1997-98 in the same period which stood at USD 4.3 billion.

An increase in the risk premium for lenders of evolving markets, downgrades by international credit rating agencies and the rise in forward premium caused an increase in the cost of funds of External Commercial Borrowings. The degrading external environment and the consistent big financial deficits have been the major causes behind the downgrading by international credit rating agencies.

Policy of External Commercial Borrowings (ECBs)-

The Government of India approves the External Commercial Borrowings (ECBs) within a consistent annual ceiling based on the balance of payments position as per a wise management of debt positions. The existing policy of ECB has been reviewed in the year 1998-99 along with the impact of the same on global markets of both the scarcity on East Asia and the sanctions of economic matters. The ECB allocation gives high importance on the infrastructure sector and export production.

Last Updated on 05/07/2011