Overview of Inflows
- Significant Increase in Inflows: Net inflows through ECB more than doubled to $20.3 billion from April 2023 to February 2024, compared to $8.8 billion during the same period the previous year. This marks the highest level of inflows in at least five years.
- Monthly Inflows: In February 2024, net inflows were $1.9 billion, up from $1.3 billion in February 2023.
Factors Driving Growth
- Lower Overseas Borrowing Costs: The rise in ECB inflows was partly attributed to a decline in the cost of overseas funds, with the overall lending rate down by 40-50 basis points (bps) compared to the previous year.
- Rate Expectations: Expectations of further rate cuts in the US also played a role, as much of the ECB is linked to the six-month to one-year benchmark rates.
- Global Benchmark Rates: The cost of registered ECBs declined by 35 bps due to reductions in global benchmark rates like the secured overnight financing rate (SOFR) and the weighted average interest margin (WAIM).
Cumulative Data (April 2024 – February 2025)
- ECB Registrations: $50.1 billion in registrations, up by $8.6 billion from the previous year.
- ECB Disbursements: $46.1 billion in disbursements, a rise of $13.4 billion compared to the previous year.
Impact of US Tariff and Rate Expectations
- US Rate Expectations: Expectations of rate cuts in the US have diminished due to tariffs and policy changes under the Trump administration. This contrasts with growing expectations for rate cuts in India, which may impact ECB borrowing costs for Indian companies.
- Currency and Tariff Uncertainty: The ongoing tariff war and currency uncertainties could reduce further ECB borrowing, with moderate borrowing expected in the financial year 2025.
ECB Flow Trends (FY21 – FY25)
- Historical Flow Trends:
- FY21: $0.2 billion
- FY22: $7.7 billion
- FY23: < $0.5 billion
- FY24: $9.5 billion
- FY25 (up to February 2025): $20.3 billion
Outlook
- Moderate ECB Borrowing: Despite a strong inflow in FY25, moderate ECB borrowing is expected in the coming financial year, influenced by uncertainties in global markets, currency fluctuations, and the domestic interest rate outlook.
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