Economics · Economy
Regarding the trend of Indian Non-Banking Financial Companies (NBFCs) increasingly accessing External Commercial Borrowings (ECBs), which of the following best explains the economic rationale and cost dynamics driving this shift?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1A structural shift where local banks capped credit limits for NBFCs, forcing permanent global market reliance.
- 2Significant widening of domestic credit spreads to their highest levels in a decade, blocking domestic bond access.
- 3Weak domestic monetary transmission keeping local borrowing costs elevated relative to hedged overseas fund options.✓
- 4The total elimination of currency hedging costs for Indian firms due to the complete stability of the Rupee.
Correct answer
Weak domestic monetary transmission keeping local borrowing costs elevated relative to hedged overseas fund options.
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