Eight non-banking financial companies (NBFCs), including a government-owned infrastructure finance company, are preparing to raise over $2 billion through external commercial borrowing (ECB), encouraged by favorable prospects for Indian firms in overseas markets.
These NBFCs, which submitted ECB requests to the Reserve Bank of India (RBI) in January, comprise REC (over $500 million), Tata Motors Finance ($200 million), L&T Finance Holdings ($125 million), and Shriram Finance ($750 million), as per RBI data.
According to a senior executive at State Bank of India (SBI), Indian companies, including well-rated NBFCs, are expected to increase their overseas borrowing due to low hedging costs and a global trend of declining interest rates, Business Standard reported.
The news platform further added quoting a top official, "while cost considerations were favorable, there was also a necessity to diversify funding sources. The overall cost has become competitive compared to domestic fundraising."
According to the "State of the Economy" article in the RBI monthly bulletin for February, ECB registrations ($36.1 billion) and disbursements ($25.6 billion) during April-December 2023 exceeded the corresponding figures from previous years.
Following the unusually high ECB registration ($21 billion) in Q1FY24, new registrations normalised to $8 billion and $7 billion during the second and third quarters, respectively.
After adjusting for principal repayment, net ECB inflows stood at $5.6 billion this year so far, compared to net outflows of $2.3 billion in the corresponding period last year.
