The liberalization of the Indian financial sector has brought in many policy reforms. These measures allow the Indian companies to look for alternative avenues of funding from various markets abroad. Of late, many companies are jumping on the External Commercial Borrowing (ECB) bandwagon to source their funds at a cheaper rate. In this backdrop, the article broadly focuses on ECB, its purpose, analysis and advantages of the same for the companies/borrowers.

With the process of liberalization in 1991, the Government of India had to progressively ease the lending and borrowing norms to meet the market expectations in the country. Progressive relaxation of norms for borrowing from different foreign countries and subsequent development of financial markets as witnessed during the early 1970's in the developed economies, is now catching up in India too. With the onset of policy reforms in the Indian financial sector, many Indian companies are exploring the avenues of external borrowings.

External Commercial Borrowings (ECBs) are foreign currency borrowings by Indian companies outside India. ECBs provide medium- to long-term funds, bridging the gap between domestic savings (household) and capital expenditure (companies). At the micro level, ECBs provide companies with an additional avenue to supplement their domestically available resources for expansion, modernization of existing projects and also for setting up new projects at competitive rates. ECBs refer to commercial loans [in the form of bank loans, buyers' credit, suppliers' credit, securitized instruments (e.g., floating rate notes and fixed rate bonds)] availed from non-resident lenders. They act as a supplementary source of funding to Indian companies in addition to the indigenous sources. Now the question that arises is - why is there a need for the companies to raise capital from the international markets? These issues are analyzed in the article from a company's perspective providing some research inputs and guidance for the benefit of companies.

Treasury Management Magazine, External Commercial Borrowings, ECBs, Indian Financial Sector, Indian Companies, International Markets, Small and Medium Enterprises, SMEs, International Banks, International Capital Markets, Export Credit Agencies, Global Markets, Financial Services, Emerging Economies, Domestic Markets, Currency Markets.