Long before the Reserve Bank of India (RBI) lowered offshore borrowing costs on 5 June, India Inc was already actively tapping overseas credit markets. Corporate treasuries have been aggressively swapping domestic rupee loans for foreign currency debt, rolling over existing dollar obligations, and raising capital for onward lending. This borrowing momentum is now expected to accelerate sharply as the central bank’s latest measures begin to lower traditional hedging barriers for domestic institutions.
According to RBI data, external commercial borrowings (ECBs) used specifically to refinance domestic and existing foreign loans jumped 40% year-on-year, from $2.3 billion in the first four months of 2025 to $3.3 billion during the same period in 2026. While total ECBs raised between January and April fell 8% annually to $19.13 billion, experts expect the central bank's latest relaxations to trigger a sharp recovery in the coming months.
“In the previous few years the interest among corporates was not high because of all-in cost, not-so-attractive and restrictive conditions towards average maturity, and regulatory permission requirements," said Pankaj Kumar, head of corporate credit at Shinhan Bank India.
This early momentum was primarily fuelled by an initial round of central bank reforms earlier in the year. Kumar noted that after the RBI relaxed its rules in February—expanding permissible end-uses, raising borrowing limits, and simplifying the reporting framework—there was a noticeable surge in corporate inquiries regarding ECB loans.
While refinancing accounted for 17.2% of the total ECBs raised between January and April, ECBs raised for on-lending accounted for a massive 42%. These were at 11.3% and 40%, respectively during the same period in 2025, RBI data showed. Recent examples include Indian Oil Corporation raising $200 million for refinance of existing ECBs, and Vedanta raising $125 million in April to refinance rupee loans. Indian non-banking financial companies (NBFCs) have been some of the biggest borrowers of foreign debt. For instance, Tata Capital and L&T Finance raised $100 million each in April.
Under the RBI scheme announced on 5 June, the central bank will provide a concessional forex swap facility for ECBs raised by public-sector units (PSUs) and Indian banks through 31 December, for tenors of up to five years. The facility effectively absorbs the full cost of hedging dollar exposure, allowing borrowers to access overseas funds at lower all-in costs.
Just the beginning
Experts said the coming months are expected to see even higher ECB numbers as the regulatory measures kick in. That’s because hedging costs remain the primary differentiator between borrowing locally versus tapping offshore debt. Currency fluctuations often erode any interest rate advantages that foreign loans offer. Despite this, companies that cannot secure the necessary capital or required loan tenors from the domestic market still turn to ECBs—even after factoring in the added expenses of currency protection.
“Hedging is more or less compulsory for companies taking overseas money. Hedging costs definitely eat into the rate benefit, but if somebody is not AAA-rated, not doing a public issue, and finding it tough to raise that amount locally, they pay the premium and raise the liability they need,” said Ajay Manglunia, executive director of Capri Global Capital and a fixed-income markets specialist.
Lenders such as State Bank of India (SBI), Bank of Baroda and Axis Bank have raised ECBs since the relaxation. SBI chairman CS Setty told Mint in June that the bank typically does not bring bonds or any loans raised overseas into India, and prefers to use them at overseas offices. “Now that the RBI is partially covering hedging costs, we are seriously considering bringing the funds into Indian operations,” he said.
JPMorgan expects Indian companies to raise as much as $14.5 billion in 2026by issuing overseas bonds,Mintreported in December 2025, citing Anjan Agarwal, India head of debt capital markets at the US bank. The majority of this could be used for refinancing existing debt, and some for financing acquisitions.
“There are many enquiries about ECBs from large corporates but it is yet to gain momentum,” said Kumar. “For small and medium companies, costing is not yet attractive. Many banks are in the process of opening offices in GIFT City to explore the ECB business more effectively. In the near future we may see interest increasing.”