Latest data indicate that ECBs have been holding up reasonably well. Flows in Jan 09 were up US$1.3bn, only marginally lower than the US$1.9bn seen in Jan 08. On a cumulative basis, however, ECB flows have slowed, to US$15.6bn in Apr-Jan FY09 from US$20.1bn in the same period last year.
However, the key is the sustainability of flows. This would depend on whether the current inflows are due to (i) recent policy changes or (ii) prior commitments. Inflows in Jan were largely due to borrowings by Vodafone Essar and Air India.
While companies are still accessing ECBs, borrowing via the foreign currency convertible bonds (FCCBs) route which had dwindled in the first few months has now ceased. In fact, with the bulk of the FCCBs turning out of the money (i.e., stock prices are trading at a discount to the conversion prices), the RBI introduced measures last year allowing companies to buy back FCCBs from rupee resources or by raising ECBs. However, due to limited funding, companies have found it difficult to buy back FCCBs.