Indian companies are aggressively shifting from rupee to dollar-denominated debt following the Reserve Bank of India's policy relaxations in February and June 2025. According to RBI data, external commercial borrowings (ECBs) specifically used for refinancing 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 measures to trigger a sharp recovery in coming months. As per DBS economist Radhika Rao, weakening capital flows have been an enduring problem for external balances, dominated by a slowdown in foreign portfolio inflows and narrower net FDI position, which cumulatively pushed the balance of payments to a deficit in FY26.
As reported by Mint, ECBs raised for on-lending accounted for a massive 42% of total ECBs between January and April, compared to 11.3% during the same period in 2025. Refinancing accounted for 17.2% of total ECBs, up from 11.3% in 2025. 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. Tata Capital and L&T Finance each raised $100 million in April, with Indian non-banking financial companies being among the biggest foreign debt borrowers. According to DBS, the RBI and government undertook measures in June 2026 to shore up inflows, which included supporting the capital account through various policy interventions.
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. According to Mint, the facility effectively absorbs the full cost of hedging dollar exposure, allowing borrowers to access overseas funds at lower all-in costs. SBI chairman CS Setty told Mint in June that the bank typically does not bring overseas loans into India but is now considering doing so due to the RBI's partial hedging cost coverage. As per DBS, the central bank's focus has shifted from monsoon concerns to geopolitical factors, with inflation being a bigger worry, leading to the removal of rate hike forecasts for FY27.
India Infrastructure Finance Company is set to secure a substantial $1 billion foreign-currency loan, potentially its largest to date, and is also in talks with the Asian Development Bank for an additional $400 million. Capri Global Capital is set to enter the foreign currency debt market, planning to raise funds through U.S. dollar denominated bonds with $300 million to $500 million and a maturity of three years and three months. This aligns with their strategy to increase capital market borrowings, aiming for 40%-50% of total borrowings from this source. State Bank of India has successfully raised $300 million by issuing three-year senior unsecured floating-rate bonds in overseas markets through their London branch, featuring a coupon tied to the Secured Overnight Financing Rate plus 100 basis points.
As reported by Mint, Pankaj Kumar, head of corporate credit at Shinhan Bank India, noted that after the RBI relaxed 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. JPMorgan expects Indian companies to raise as much as $14.5 billion in 2026 by issuing overseas bonds, with the majority used for refinancing existing debt. Kumar noted that while there are many enquiries from large corporates, the costing remains not yet attractive for small and medium companies, with many banks opening offices in GIFT City to explore ECB business more effectively. According to DBS, the need to accommodate higher subsidies and lower revenue growth is likely to result in a modestly wider fiscal deficit in FY27, while some recovery in FPI debt and FDI is expected in early FY27.
