Economics · Economy
Regarding the trend of Indian Non-Banking Financial Companies (NBFCs) increasingly accessing External Commercial Borrowings (ECBs), which of the following statements best explains the underlying economic rationale and cost dynamics of this shift?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Overseas fundraising surged because domestic bond yields fell significantly below international benchmarks, causing a domestic liquidity crisis.
- 2The RBI mandated that NBFCs diversify at least 25% of total liabilities into foreign currency to reduce domestic concentration.
- 3NBFCs leverage a cost arbitrage yielding net savings even after hedging currency risks, primarily due to incomplete domestic monetary transmission.✓
- 4The transition is driven by domestic credit spreads reaching historic highs, making domestic borrowing impossible.
Correct answer
NBFCs leverage a cost arbitrage yielding net savings even after hedging currency risks, primarily due to incomplete domestic monetary transmission.
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