Indian companies' external commercial borrowing fell 51% to $5.43 billion in March 2026 compared to $11.04 billion in March 2025, according to central bank data published Thursday. As per Business Standard, the proposals filed by Indian companies, including non-banking financial companies (NBFCs), were lower than the $11.04 billion they had filed in March 2025, but higher than preceding February's $4.59 billion. Of the total, intent from general permission stood at $5.22 billion in March 2026, and special permission was $212 million, according to RBI data. This sharp decline reflects the impact of high interest rates, pronounced rupee weakness, and increasing hedging costs that prevented local companies from borrowing more overseas. The decline coincided with a global bond selloff that capped the biggest weekly jump since President Donald Trump's tariffs threw markets into a tailspin in April 2025. As per The Economic Times, typically March sees a spike in borrowings as companies look to use up their limits for the year, but last fiscal was different because of rupee volatilities, higher global rates and more importantly higher hedging costs which meant that companies allowed their limits to expire rather than borrow at the higher cost.
The higher borrowing costs were also reflected in the fiscal year-end data, with external commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs) down 30% to $42.87 billion in FY26, versus $60.93 billion in FY25. According to The Economic Times, a senior banking executive from a US-based bank explained that "A well-rated corporate could get a short-term loan at 6.5% to 7% domestically, whereas the overseas rates were much higher than that. Naturally, companies chose to borrow from local banks. When hedging costs and forward rates are up, overseas loans are bound to fall." The current global bond market turmoil, with US 10-year yields rising more than 11 basis points to peak just shy of 4.60%, is compounding these challenges as rising yields not only lift borrowing costs for governments but exert a drag on the pace of global economic growth by rippling through to business and consumer loans. As per The Economic Times, borrowing costs for governments around the world were rising on Friday on renewed worries about the inflationary impact of the Iran war, with investors now anticipating further rate increases from central banks worldwide.
Amid concerns over sluggish capital expenditure growth, data suggested there were 19 filings for new projects totalling a borrowing of $1.14 billion, with $1.22 billion intended to refinance existing ECB or rupee loans. Among the prominent firms that filed intentions in March 2026 with the RBI, Rajasthan Part I Transmission secured $750 million for a new project with funding from a financial institution in an international financial services centre having a maturity of 4 years and 11 months. IIFL Finance filed for raising $700 million from the international capital market, while Adani Transmission Step-One sought to raise $500 million to refinance existing ECB. Other notable applications included Bajaj Finance and Sammaan Capital filing for $400 million each, Indian Railway Finance Corporation for $391.58 million, and REC for $250 million.
The moderation in ECB borrowing was further influenced by the rupee's depreciation of about 10% in FY26, which depreciated more than the average in previous years. As reported by The Economic Times, the rupee ended fiscal 2026 as the worst performer in Asia against the US, losing close to 10% of its value in a year marked by record exits from Indian equities by overseas investors amid a global scramble for dollar-based assets. Opening the financial year at Rs 85.59 per dollar, the rupee ended at Rs 94.83 and has since weakened to an all-time Rs 95.96 per dollar. Global financial market volatilities, particularly after the start of the Iran war, meant that corporate India could not afford to borrow abroad, especially in March. According to Business Standard, the decline was further attributed to financial market volatilities following the West Asia conflict, which created additional uncertainty for international borrowing activities. The current global selloff has been driven by crude oil prices climbing and the US and Iran showing little sign of ending a conflict that's cut off key shipments through the Strait of Hormuz.
The sharp drop in foreign borrowing indicates two critical factors affecting India's economic landscape. As reported by Upstox, currency risk becomes more pronounced as external commercial borrowings are largely linked to global treasury yields, with a surge in yields indicating potential rate hikes that could lead to higher capital costs. Additionally, poor capex visibility emerges as a concern, with India Inc foreseeing poor aggregate demand following the West Asia crisis where crude oil remains at elevated levels, leading to delays in capex decision-making. The market dynamics are further reflected in recent bond market developments, with NABARD withdrawing its planned ₹7,000-crore bond reissuance after receiving only ₹3,000 crore in bids at a yield of 7.79%. According to Rockfort Fincap LLP, this reflects a deeper shift where investors are demanding higher yields even from AAA-rated issuers, with market participants increasingly preferring floating-rate structures over fixed-rate exposure due to expected rate volatility. Despite the 51% decline potentially being viewed as a temporary blip, the trend could result in domestic credit demand rising further as companies shift to domestic banks for financing, with domestic interest rate volatility remaining certain.
