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Sujai Adithya
Business Development and Banking & Financial Services Expert
Asked a question last year

What are the advantages of External Commercial Borrowing and how does it impact our economy?

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Sujai Adithya
Business Development and Banking & Financial Services Expert

Impact on our Economy

The government is utilizing the ECBs2 primarily for funding of infrastructure and SME sector. The benefit for our economy is that low-cost International funds can improve our inflow of money in important sectors. Our companies are heavily dependent on ECB so that they can lower their cost of borrowing. We need to be cautious as the increase in ECB is not a good sign for our economy as our currency will be in risk and the rupee gets depreciated, if there is an increase in ECB. Thus, it clearly shows that if ECBs are not controlled, there can be a huge debt causing a problem for our economy.

Advantages

  • The interest rates are very low for lending compared to domestic funds.
  • The large volume of funds can be borrowed.
  • The global financial market is a much bigger source of credit.
  • Any corporate can raise ECB from internationally recognized sources such as banks and some credit agencies.