This note is very short and concise introduction to the concept of external debt. 1. According to the [External Debt Statistics - Guide for Compilers and Users, International Monetary Fund (IMF), 2003](IMF_2003_External%20Debt%20Statistics-Guide%20for%20Compilers%20and%20Users,%202003.pdf), External debt is defined as the outstanding amount of those actual current, and not contingent, liabilities that require payment(s) of principal and/or interest by the debtor at some point(s) in the future and that are owed to non-residents by residents of an economy. 2. External Debt is the Gross external debt and is a stock variable and is measured at a point in time. 3. It measures the debt component of India's total external liabilities, whereas India's investment Position (IIP) measures the total stock of external financial liabilities (debt and non-debt) and assets. 1. The latest guide by IMF is External Debt Statistics: Guide for Compilers and Users (2013 EDS Guide) released in 2014 ## Components of External Debt 1. The components of the external debt can be classified based on the following: 1. Sector-Wise Classification 2. Creditor-Wise Classification 3. Debtor-Wise Classification 4. Currency-Wise Classification 5. Instrument-Wise Classification 6. Maturity-Wise Classification 7. Total External Debt by Original Maturity 8. Total External Debt by Residual Maturity 9. Short-term Debt by Original Maturity 10. Concessionality-Wise Classification 2. **Currency-wise** - This debt can be in rupee or foreign exchange. We can see here external debt of government and quasi-govt institutions ([AIFIs](All%20India%20Financial%20Institutions%20(AIFI).md), PSUs) is mainly in foreign currency. 1. Foreign currency 1. Govt debt 1. external aid assistance 1. Multilateral 2. Bilateral 2. IMF (SDRs) - [1.3 Special Drawing Rights (SDRs)](WSS%20-%20Weekly%20Forex%20Reserves.md#1.3%20Special%20Drawing%20Rights%20(SDRs)) are long-term liability of the member because upon termination of participation in, or liquidation of, the SDR Department, the member will be required to repay these allocations and because interest accrues (if SDRs are used). Hence, SDR allocations are shown in the gross external debt position. If there are any IMF borrowings apart from SDF allocations, they will also form part of external debt. 3. FCY sovereign debt securities- As of now, there is no outstanding FCY sovereign debt. Here *foreign currency defence debt* can be part of commercial borrowings if borrowed from foreign commercial banks or bilateral loans. Also, Quasi-govt multilateral and bilateral borrowings (can be part of govt debt or commercial borrowings) 2. ECB - non-government/commercial borrowings* 3. Trade Credits (including trade advances) 4. Currency and Deposits 1. NRI Deposits - FCNR(B) from a non-resident Indian; 2. RBI - balances of foreign central banks/international institutions with RBI, 3. Vostro balance (foreign banks’ money with Indian banks) and Nostro overdrafts (banks overdrawn abroad) of commercial banks, etc. 2. Rupee Denominated Debt, which can include: 1. [Masala bonds](ECB%20(Borrowings%20in%20Rupee%20and%20FCY).md#Masala%20Bonds%20(Rupee-denominated%20bonds%20overseas/offshore%20Rupee%20bonds)) 1. On October 2013, RBI allowed IFC, on pilot basis to raise INR denominated ECBs/bonds. 2. FPI investment in INR bonds (corporate debt, govt securities) 1. Increase in investment limits for FPI in the debt segment – in both G-sec and corporate bond market, this component has increased, favorable yield differentials, stable rupee, lower inflation, reforms in debt segment by RBI and SEBI have made the Indian rupee debt attractive to foreign investors. 3. Foreign central banks and international institutions' holdings of Treasury Bills/G-Secs (if any) 4. ECB in INR (which is allowed in some cases) 5. Currency & Deposits 1. Non Resident Deposits 1. NRI Deposits - NR(E)RA from a non-resident Indian, NRO from from a non-resident Indian, 2. Non-Resident Deposits (other than NRI) - NRO from any person resident outside India other than NRIs While these are deposits, they are considered contractual debt liabilities of the banking system to non-residents, requiring repayment of principal and interest in foreign currency, making them part of the total external debt stock 6. [Trade Credits](Trade%20Credits.md) & Trade Advances (if INR-denominated) 1. [September 10, 2015](RBI_Notification_20150910_Trade%20Credit%20Policy%20-%20Rupee%20(INR)%20Denominated%20trade%20credit.pdf) - RBI allowed resident importer to raise trade credit in Rupees (INR) 2. Trade Advances - They are just timing mismatches in trade payments, like good received by importers but payment not made, or payment received by exporters but goods not shipped yet. 7. Rupee debt service - Interest payments on and principal repayments on account of civilian and non-civilian debt in respect of Rupee Payment Area (RPA). It is mostly to Russia, earlier USSR. 1. Though interest payments are part of Current Account (Invisibles/Income), and Principal repayment come under Capital Account (debt reduction/amortisation), they are added together in the Balance of Payments report under the "Capital Account" transactions. 8. The share of the rupee denominated debt has rose to 33.6% at end-March 2017 from 11.6% at end-March 2000. 3. **Maturity Profile** - External debt can separated into original maturity and residual maturity, and further into long-term debt (dominates the maturity) and short-term debt. 1. So short-term debt can be analysed by original maturity, and residual maturity. This is closely monitored as it can have impact on liquidity of foreign exchange. 2. Short-term debt (by residual maturity) sees a sharp-fall in some quarter vs previous quarter if there is some repayment of the debt like, FCNR(B) deposits. 4. **Borrower/Debtor-wise classification** (this can be based on the IMF format) 1. Central Bank - balances of foreign central banks/international institutions with RBI 2. Govt Debt (short$+$ long term) 1. External assistance - multilateral (not IMF) and bilateral loan 2. IMF borrowings (SDR-related) 3. Foreign currency (FCY) defence debt 4. Rupee Debt (Rupee Payment Area - civilian and non-civilian debt) 3. Deposit-Taking Corporations (except the Central Bank) 1. It includes Non Resident Deposits, Vostro balance (foreign banks’ money with Indian banks) and Nostro overdrafts (banks overdrawn abroad) of commercial banks, etc. 4. Other Sectors 1. Other financial corporations (borrowings in form of loans/debt securities) 1. They can be mutual funds, insurance companies, pension funds, Non-deposit-taking NBFCs 2. Non-financial corporations (borrowings in form of loans/debt securities) 1. These are companies whose main activity is not financial like manufacturing, IT, services, etc. 3. Households and non-profit institutions serving households - Individuals and families, charities, NGOs, trusts, religious institutions that provide services to households 5. **Lender/Creditor-wise classification (2003 format) 1. Multilateral organizations 2. Bilateral individual countries 3. IMF-SDR 4. Trade credit 5. Commercial borrowings, 6. NRI deposits, 7. Rupee debt, and 8. Short-term debt 1. balances of foreign central banks/international institutions with RBI, et 6. **Instrument-wise** (*sectoral position of debt is further classified by instrument types*) 1. IMF-SDRs 2. Loans - external assistance on Govt. account (multilateral and bilateral loans), ECB in form of loans or inter-company lending, external defence debt of the govt. 3. Trade Credits & Trade Advances 4. Debt Securities 1. Bonds like Masala, 2. FPI investment in govt. securities and corporate bonds, 3. ECB in form of securities/bonds, 4. Investment in Treasury Bills by foreign central banks and international institutions etc. 5. Currency and Deposits (mainly NRI) 7. **Sector-wise** 1. Govt/Sovereign Debt (short$+$ long term) 1. External assistance - multilateral (not IMF) and bilateral loan 2. IMF borrowings (SDR allocated, and IMF loans) 3. Foreign currency (FCY) defence debt 4. Rupee Debt (Rupee Payment Area - civilian and non-civilian debt) 2. Non-Govt/Non-Sovereign Debt 1. All the remaining components of external debt 8. **Concessionality-wise** 1. Concessional External Debt 1. These are loans to the govt., like those from some multilateral institutions like the International Development Agency (IDA), the International Fund for Agricultural Development (IFAD), and the Organization of Petroleum Exporting Countries (OPEC), that are offered at below-market interest rates, often with longer grace periods. 2. All government borrowings from bilateral sources are classified as concessional 3. Non-government sector 1. Bilateral loans to the non-government sector that carrying concessional terms. 2. Rupee debt, which is serviced through exports 4. Rupee debt, which is serviced through exports, is also treated as concessional 2. Non-Concessional External Debt - Any borrowing that doesn’t meet the concessional criteria (that is, prevailing interest rates, commercial terms), like those to the govt. from some multilateral institutions like the International Bank for Reconstruction and Development (IBRD), Asian Development Bank (ADB), and any other private sector borrowings. 3. The share of concessional debt in total external debt fell to 6.9 per cent at end-March 2025 from 7.4% per cent a year earlier, marking the lowest level in the past decade >[Box 2: COVID-19 and Debt Relief from Multilateral Agencies](GoI_Reports_202309_India's%20External%20Debt%20-%20A%20Status%20Report_2022-23.pdf#page=40&selection=12,0,16,5) in India's External Debt - A Status Report_2022-23 ## Cost of External Debt 1. Now external assistance, NRI deposits, and commercial borrowings are three leading sources of India’s external debt 2. Among the sources of debt, commercial borrowings is the costliest source of debt, followed by NRI deposits and external assistance ## Sovereign External Debt 1. The external debt of the govt is [managed](G-Secs-Primary%20Market.md#Debt%20Management) (policy, monitoring, reporting) by the External Debt Management Unit (EDMU) under the Economic Division, Department of Economic Affairs (DEA), Ministry of Finance. 2. State Govt - In 2017, govt. allowed state entities to borrow directly from bilateral overseas lending agencies to fund infrastructure projects subject to conditions. According to Article 293 of the Indian Constitution, states cannot raise loans from outside India without the consent of the Government of India if they have outstanding loans to the Centre. ## Data Releases 1. **Quarterly** 1. While the Reserve Bank compiles and releases India's external debt statistics for the quarters ending March and June, the data for the quarters ending September and December are compiled and [released](https://dea.gov.in/reports-external-debt) by the Ministry of Finance, Government of India. ## External Debt Statistics 1. So every six months, the Reserve Bank publishes data on external debt. 2. The external debt data in rupee and US dollar terms, is released on the last working day of June and September. 3. **Annual Report** 1. India's External Debt - A Status Report. They are released annually in September by Department of Economic Affairs (DEA), Ministry of Finance 2. [2024-25, September 2025](GoI_Reports_202509_India's%20External%20Debt%20-%20A%20Status%20Report_2024-25.pdf) 3. [2023-24, September 2024](GoI_Reports_202409_India's%20External%20Debt%20-%20A%20Status%20Report_2023-24.pdf) 4. [2022-23, September 2023](GoI_Reports_202309_India's%20External%20Debt%20-%20A%20Status%20Report_2022-23.pdf) 4. Balance of Payments data is released by RBI, with a lag of every quarter 1. So the data for April-June is released on last day of September 2. July-September, 2025 is released on last day of December, and so on 3. Source - - [About Us](https://rbi.org.in/scripts/AboutUsDisplay.aspx)/Communication Policy of RBI/NSDP ## References ### [[Speeches & Media Interactions|Speeches]] 1. Y.V. Reddy. (Nov 18, 1997). External Debt and Economic Reform, Seminar on New Opportunities in Global Finance - by Dr. Y.V. Reddy at Bangalore. [Link](https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=232) 2. Y.V.Reddy. (Jun 06, 1998). Inaugural Address to Technical group on external debt statistics - Speech by Y.V.Reddy. [pdf](RBI_Speeches_19980606_Inaugural%20Address%20to%20Technical%20group%20on%20external%20debt%20statistics%20-%20Speech%20by%20Y.V.Reddy.pdf) 3. Y.V. Reddy. (Jun 11, 1999). External Debt Policies in Emerging Economies :New Dimensions - Dr.Y.V. Reddy, at the Seminar on Corporate External Debt Management organised by CRISIL with participation of The World Bank and Ministry of Finance, Government of India, at Kathmandu, Nepal, on June 11, 1999. [Link](https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=20) ### [[Publications (Data Releases) & Research#Publications|Publications]] 1. RBI. (May 17, 2022). ==Growth Maximising External Debt of India==. RBI-Bulletin May 2022. [pdf](RBI_Monthly_Bulletin_Article_20220517_Growth%20Maximising%20External%20Debt%20of%20India.pdf) 2. RBI. (Jan 11, 2020). ==An Assessment of India’s External Debt Sustainability and Vulnerability==. RBI-Bulletin Jan 2020. [pdf](RBI_Monthly_Bulletin_Article_20200111_An%20Assessment%20of%20India’s%20External%20Debt%20Sustainability%20and%20Vulnerability.pdf) 3. RBI. (Dec 11, 2017). Anatomy of India’s External Debt: Assessment of Key Trends. RBI-Bulletin Dec 2017 [pdf](RBI_Monthly_Bulletin_Article_20171211_Anatomy%20of%20India’s%20External%20Debt-Assessment%20of%20Key%20Trends.pdf) 4. Dr. A.Vasudevan. (May 06, 1999). External Debt Management:Issues, Lesson and Preventive Measures. Book. [Link](https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=1031) ### Others 1. DEA, Ministry of Finance. (September, every year). ==Annexure I: External Debt: Definitions, Concepts and Dissemination of Data in the annual report "India's External Debt - A Status Report."== 2. IMF. (003). External Debt Statistics: Guide for Compilers and Users, 2003. [Link](https://www.imf.org/external/pubs/ft/eds/eng/guide/file1.pdf) 3. IMF. (2013). External Debt Statistics: Guide for Compilers and Users (2013 EDS Guide) released in 2014. [pdf](IMF_2013_External%20Debt%20Statistics-%20Guide%20for%20Compilers%20and%20Users%20(2013%20EDS%20Guide).pdf)