GIFT IFSC captures 65% of ECBs in FY26 on lower taxes, lighter rules

Nearly two-thirds of external commercial borrowings (ECBs) raised so far in the ongoing financial year (2025-26/FY26) have been routed through Gujarat International Finance Tec-City (GIFT City), a sharp jump from the 36 per cent recorded in 2024-25.

Data from the Reserve Bank of India (RBI) shows that total ECBs raised between April and December 2025 stood at $27.5 billion. Of this, $18 billion was routed through the International Financial Services Centre (GIFT IFSC), according to data shared by GIFT City officials.

“With the progressive expansion of IFSC banking units (IBUs), the entry of leading global banks, and a stable regulatory and tax framework, GIFT IFSC has moved from being an alternative channel to an increasingly preferred jurisdiction for ECB intermediation,” said Sanjay Kaul, managing director and group chief executive officer, GIFT City.

As of December 2025, the cumulative value of ECBs booked through GIFT IFSC stood at $55.7 billion, officials said.

There were 35 IBUs operating in the financial hub as of September 2025, comprising both Indian and foreign banks. Their cumulative assets stood at around $100 billion till the second quarter (July–September/Q2) of FY26. The IBUs function as offshore banking branches and lend in foreign currencies such as the US dollar, euro, and pound sterling to Indian companies.

“This rising share reflects multiple structural advantages, including competitive costs of funds, operational efficiency, reduced reliance on offshore financial centres, and the presence of globally active banks offering sophisticated treasury and cross-border financing solutions,” Kaul added.

Experts credit the growing traction to an expanding borrower base, along with easier compliance and disclosure requirements. They said corporates now find it simpler to raise funds via GIFT City than through traditional offshore jurisdictions such as London, Luxembourg, Hong Kong, or Singapore.

“An interesting development is the issuance of environmental, social, and governance bonds — green, social, sustainable, and sustainability-linked — which has seen around $16 billion raised so far. This has been enabled by the regulator recognising globally accepted taxonomies for such issuances. This clarity has helped both investors and issuers better understand requirements and compliance standards that investors are comfortable with,” said Pradeep Ramakrishnan, executive director, International Financial Services Centres Authority.

The RBI regulates the ECB loan framework under the Foreign Exchange Management Act (Fema), 1999. ECBs are a key funding avenue for eligible Indian entities seeking access to overseas capital.

Experts observed that fundraising through GIFT City comes with significant regulatory relaxations, helping the destination emerge as a preferred choice.

“Entities that have set up units in GIFT City can raise funds from non-resident lenders without Fema restrictions, as ECB regulations do not apply to such fundraising. In addition, any interest paid by GIFT units is exempt from Indian tax for non-resident lenders. Typically, Indian borrowers need to bear the tax cost of such borrowings to sweeten the deal for foreign lenders. This cost is significantly reduced when raising funds through GIFT City,” said Surajkumar Shetty, partner, JSA Advocates & Solicitors.

Tax experts added that the 10-year tax holiday applies to interest payable on borrowings, implying no tax incidence and, consequently, no withholding tax on interest payments for ECBs raised via GIFT City.

“This is a major benefit compared with withholding tax rates of 20–35 per cent on interest for ECBs raised in India outside GIFT City. The government has further extended the tax holiday for units in GIFT City to 20 consecutive years out of a block of 25 years in the Union Budget 2026. This is expected to further support ECB activity and other investments in GIFT City,” said S R Patnaik, partner (head — taxation), Cyril Amarchand Mangaldas.

Earlier this week, Piramal Finance secured a $400 million ECB facility from a consortium of international and Indian banks. Earlier in 2025, companies such as Indian Railway Finance Corporation and NTPC also secured or signed agreements for ECB loans through GIFT City.