Cumulative ECBs by PSUs rose from $1.34 billion on July 17 to $2.59 billion on August 21, up about 93% in just over a month | Photo Credit: 200degrees

India’s external commercial borrowings (ECBs) surged to $6.08 billion in June 2026, marking a sharp increase on both year-on-year and month-on-month basis.

The June borrowing was 74.4 per cent higher than the $3.48 billion recorded in June 2025, while it was 28.3 per cent above the $4.74 billion raised in May 2026.

According to Madan Sabnavis, Chief Economist at Bank of Baroda, the reasons for the significant acceleration in overseas borrowing, “is largely the cost factor, coupled with tight liquidity in the domestic market, which eased only in July when flows improved.” The cost factor pertains to the prevalent interest rate differential between India and abroad, he explained.

Vivek Iyer, partner at Grant Thornton Bharat, added another, “reason for the change is the FEMA (borrowing and lending) amendments in February 2026, that liberalised the ECB framework.” The changes related to both borrowing limits and rates have been key drivers, he adds.

PSUs step up overseas borrowing

External borrowings by public sector undertakings (PSUs) rose 25 per cent year-on-year to $1.06 billion in June 2026, from $0.85 billion a year earlier. The number of PSUs raising ECBs doubled from two to four.

The acceleration is likely due to RBI’s special swap mechanism for ECBs, which came into effect on June 8.

According to RBI data, cumulative ECBs by PSUs rose from $1.34 billion on July 17 to $2.59 billion on August 21, an increase of about 93 per cent in just over a month. Compared with the June-end level, the August 21 figure was more than 2.4 times higher, highlighting the sharp post-June expansion in PSU overseas borrowing.

In June 2025, NTPC and NLC were the borrowers, whereas in June 2026, Power Grid and HUDCO borrowed for lending or sub-lending, while PFC and IHB cited general corporate purpose.

Purposes

A notable shift in June was the growing importance of working capital as a reason for raising ECBs. 76 companies cited working capital or general corporate needs as the purpose of their borrowing in June 2026, up 55 per cent from 49 companies in June 2025, indicating the growing use of overseas funds to support day-to-day business requirements.

Sourcing capital goods remained another important purpose. In June 2026, 19 companies in total borrowed for sourcing capital goods, 10 for importing, while another 9 borrowed for local sourcing.

“The general trend of the tilt away from capex has been building for the past two years,” says Iyer. “From a long-term standpoint, ECB funds going towards working capital and not capacity creation has implications for growth in the long-run,” he added. 

Published on August 27, 2026