India's external debt is projected to rise to US$620 billion by the end of March 2026, RBI calls stability comfortable
India's external debt is estimated to reach US$620.0 billion by the end of March 2026, up 5.5% from the previous year. Commercial loans account for about 50.3% of total external debt, while the debt service ratio remains comfortable at 5.1%.
Highlights
- India's external debt is expected to rise to US$620 billion by the end of March 2026, with the share of short-term debt at 25.1%.
- According to the RBI, the increase in external debt is mainly due to a rise in external commercial borrowing by the private sector, but the level remains manageable.
- According to the RBI report, repayment capacity and the overall profile are under control, and the external debt structure is overall balanced for financial stability.
This article was translated from the original. Read the original version by our correspondent here.
Main Features of the Debt Structure as of March 2026
According to a press release from the Reserve Bank of India, the share of short-term debt in total external debt rises from 24.7% at the end of March 2025 to 25.1% at the end of March 2026. The central bank states that this increase is mainly linked to rising external commercial borrowing by the private sector, and that the current level remains manageable.The RBI has stated that India's external debt is highly sustainable and there are no immediate concerns regarding its stability. The detailed assessment also highlights that the debt structure remains healthy overall.
Financial Stability and Market Impact
The large share of commercial loans in the external debt mix indicates that corporates and the private sector continue to play a significant role in foreign borrowing. Despite a slight increase in the share of short-term debt, the RBI's assessment suggests that repayment capacity and the overall liability profile remain within controlled limits.The report also covers aspects such as sectoral composition, currency structure of the debt, and repayment schedule. These indicators suggest that India's external debt structure is currently balanced and continues to support overall financial stability.
In our previous report, we discussed changes in RBI's forex risk rules and their impact on the EUR/INR pair. It was noted that relaxing the calculation of net open positions and merging onshore-offshore positions could change banks' currency risk strategies and market liquidity expectations, while EUR/INR was technically showing signs of remaining stable within a limited range.
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