a. External Commercial Borrowing

♤ External Commercial Borrowings (ECB) refer to commercial loans availed from non- resident lenders with minimum average maturity of 3 years.

♤ ECB includes bank loans, buyers’ credit, suppliers’ credit, securitised instruments (e.g.

floating rate notes and fixed rate bonds).

♤ ECB can be accessed under two routes, viz., Automatic Route and Approval Route

♤ Under approval route, the explicit permission of government is required before taking loan. It is required for specific sectors such as export and import.

♤ ECB is different from FDI in the sense that FDI is the foreign money invested to finance equity capital. Whereas, ECB is any kind of funding other than equity.

♤ ECBs have been a crucial determinant of the magnitude of India’s external debt and its

single largest component.