The Reserve Bank of India (RBI) on Thursday has announced a cap for funds raised via external commercial borrowing (ECB) at 6.5% of the country’s GDP.
Based on GDP figures for March 31, 2018, ‘the soft limit works out to $160 billion,’ the central bank said in a statement.
Outstanding stock
“It has been decided, in consultation with the Government of India, to have a rule-based dynamic limit for outstanding stock of external commercial borrowings (ECB) at 6.5% of GDP at current market prices,” the RBI said. The outstanding stock of ECB as on September 30, 2018 was $126.29 billion.
ECBs refer to commercial loans in the form of bank loans, securitised instruments buyers’ credit, suppliers’ credit availed of from non-resident lenders with a minimum average maturity of three years.
