External Commercial Borrowings are borrowings by Indian entities especially the corporate from overseas markets (foreign financial institutions like banks). ECB is a commercial loan which is to be repaid in principal and interest. ECBs are recorded in the capital account of India’s balance of payments.
Ever since the liberalisation of capital account, ECBs constitute to a significant amount of India’s capital account. The demerit of ECB is that they are debt flows. At the same time, they are a major source of funds for the Indian corporate. For them, ECBs is attractive because of the advantage of bulk borrowing, lower interest rate compared to domestic borrowing and the additional advantage that the funds will be obtained in foreign currency.