What is External Commercial Borrowings (ECBs)?
- Any money borrowed from foreign sources for financing the commercial activities in India are called ECBs. The Central Government permits ECBs as a source of finance for Indian Corporates for expansion of existing capacity as well as for fresh investment.
- Thus, ECBs are defined as money borrowed from foreign resources including the following:
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- Commercial bank loans
- Buyers’ credit and suppliers’ credit
- Securitised instruments such as Floating Rate Notes and Fixed Rate Bonds etc.
- Credit from official export credit agencies and commercial borrowings from the private sector window of Multilateral Financial Institutions such as World Bank, ADB, AFIC, CDC, etc.
How ECB is different from FDI?
In case of Foreign Direct Investment, the foreign money is used to finance the Equity Capital. But in case ECBs, foreign money is used to finance any kind of funding other than Equity.