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Informist, Wednesday, Jun. 10, 2026

 

By Vaishali Tyagi

 

NEW DELHI – The Reserve Bank of India's concessional dollar-rupee swap facility for public sector undertakings' external commercial borrowings and overseas foreign currency borrowings is expected to push overall overseas borrowing to $65 billion in 2026-27 (Apr-Mar), according to the median of estimates from eight market participants polled by Informist, up from $43 billion in FY26. 

 

The lowest estimate for total mobilisation of external commercial borrowings and overseas foreign currency borrowings was $50 billion from Housing and Urban Development Corp. and Bank of India Mutual Fund, while the highest was $100 billion from State Bank of India. 

 

RBI Governor Sanjay Malhotra Friday announced a concessional dollar-rupee swap for overseas borrowing to boost forex inflows and support the domestic currency. The RBI introduced a forex swap facility for external commercial borrowings with maturities of three years or more and overseas foreign currency borrowings raised by authorised dealer category-I banks with a minimum maturity of three years.

 

The swap will be done at a fixed rate of 1.5% per annum, compounded semi-annually. Under the arrangement, banks can sell dollars to the RBI and agree to buy back the same amount back at maturity, in multiples of $1 million. The swap facility came into effect on Monday and will remain open until Jan. 15 for eligible external commercial borrowing and overseas foreign currency borrowing flows received by Dec. 31.

 

The RBI had deployed a similar forex swap window during the 2013 taper tantrum when fears of US Fed tightening triggered capital outflows and pressured the rupee. Market participants said the facility's primary objective is to increase dollar inflows, which would support the rupee and reduce forward premiums, thereby lowering hedging costs for PSUs. "USD/INR will appreciate... I see it around 93 (per dollar) by March 2027," a treasury official at a private bank said. At 1419 IST, the rupee was at 95.34 per dollar.

 

"The PSU ECB swap facility will offer further incentives to PSUs to borrow in dollars and swap them into rupees, similar to the 2013 RBI FX swap window," Barclays said in its report. "This may see an uptake of $15 billion to $20 billion over the next few months, but demand will be constrained by the fact that global rates are still elevated."

 

Indian companies raised about $43 billion through external commercial borrowings in FY26, 30% lower than $61 billion in FY25, as companies stepped up borrowing from the domestic market amid softer interest rates and a depreciating rupee, according to RBI data.

 

Market experts remained divided on whether PSU overseas borrowing would exceed last year's volume if oil marketing companies tapped overseas markets for funding. Some market participants expect overall overseas borrowing volumes in FY27 to hit an all-time high. Meanwhile, others said their borrowing plans remained unchanged and that the RBI's recently announced measures might not add much to overall fund-raising, though they could attract more PSUs. Most agreed borrowing volumes would still exceed FY26's $43 billion. "If PSU-OMCs join overseas borrowing, it will exceed the previous year's borrowing for both ECBs and US bond issuances," Venkatakrishnan Srinivasan, managing partner at Rockfort Fincap, said. 

 

When asked about preferred maturities, most market participants said issuers would largely tap overseas markets in the three- to five-year maturity segment. A handful of other participants said tenor choice would depend on individual issuer requirements and funding needs.

 

Most participants said there could be an initial rush before the RBI's Dec. 31 deadline, after which the pace could slow. Most participants expect heavy early drawdowns as issuers rush to lock in the RBI's 1.5% swap before the Dec. 31 cutoff for eligible drawdowns. "Initially, there will be a lot of rush, maybe in Jun-Jul, but afterwards it depends on what the arbitrage is between dollar borrowing and domestic bond borrowing," an official at HUDCO said.

 

HUDCO plans to raise $1.5 billion-$2.0 billion through external commercial borrowings this fiscal year, an official said. "There is no change in our external commercial borrowing plans even after the swap facility announcement," the official added. "In any case, we were planning ECBs... so, we are going ahead with that." 

 

HUDCO will issue both dollar- and yen-denominated bonds, with a five-year tenor. On May 22, Informist Media reported that the state-owned company plans to raise up to $700 million in the quarter ending June through five-year yen-denominated bonds. The official added that the company was already in talks and would finalise the plan within a month. "We will keep a mix of JPY (Japanese yen bonds) as well as dollars (bonds), not only full dollar (bonds)," the official said. 

 

Export-Import Bank of India said its external commercial borrowings would be around $1.5 billion-$2.0 billion in FY27. The financial institution saw no reason to revise its estimates following the RBI measures. "I don't really see a struggle when I look at my secondary levels or indications, we are continuously speaking to our arrangers, so if you really ask me that estimate, it really doesn't change with the recent development," an official at the bank said. 

 

Other large state-owned financiers are already in talks with banks and are expected to raise funds through this window within a month, people aware of the matter said. National Bank for Financing Infrastructure and Development will prioritise external commercial borrowings and preserve its available domestic borrowing limits for later use, an official at NaBFID said. "We are working on it (external commercial borrowing), and we will come up with it in a month," the official told Informist on condition of anonymity. 

   

An official at the National Bank for Agriculture and Rural Development said the external commercial borrowing window would help diversify the organisation's funding sources and was unlikely to reduce its domestic borrowing in the current fiscal year.   

 

POLL DETAILS

 

Name of Estimate	Amount (in billion)
Kotak Mahindra Bank	75
India Ratings and Research	55
State Bank of India	100
Housing and Urban Development Corp.	50
JM Financials	65
Bank of India Mutual Fund	50
National Bank for Agriculture and Rural Development	70
Kotak Mutual Fund	55
Average	65

 

End

 

US$1 = INR 95.30

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

With inputs from Meera Nair and J. Navya Sruthi

Edited by Akul Nishant Akhoury

 

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