Key Details
The RBI’s India’s External Debt: A Status Report as at End-March 2026 shows that while external debt increased during FY2025–26, the rise was concentrated in private-sector borrowing and accompanied by largely stable debt sustainability indicators.
Key Area | Update | What It Indicates |
|---|---|---|
External Debt | Increased to US$762.8 billion | Reflects higher external financing by Indian entities |
Underlying Increase | Excluding exchange-rate valuation effects, debt would have increased by US$51 billion | Indicates stronger underlying borrowing than headline numbers suggest |
Debt-to-GDP Ratio | Rose from 19.8% to 20.8% | External leverage increased only marginally |
Major Borrower | Non-financial corporations accounted for 36.4% of total external debt | Private sector remained the largest external borrower |
Debt Structure | 80.4% of external debt remained long-term | Reduces refinancing risks |
Currency Composition | US dollar (55.5%) followed by Indian rupee (29.4%) | Shapes exposure to exchange-rate movements |
Debt Service Ratio | Improved from 6.6% to 5.8% | Indicates stronger repayment capacity |
Residual Maturity | Debt due within one year equalled 42.9% of total debt and 47.3% of forex reserves | Highlights the importance of maintaining adequate reserve buffers |
Summary
External Debt Increased, but the Headline Numbers Do Not Tell the Full Story
According to the RBI’s India’s External Debt: A Status Report as at End-March 2026, India’s external debt increased by US$26.3 billion during FY2025–26 to reach US$762.8 billion. However, the RBI notes that movements in exchange rates significantly influenced the reported increase. The appreciation of the US dollar generated a valuation effect of US$24.6 billion, meaning that, after excluding valuation changes, external debt would have increased by around US$51 billion. The report therefore distinguishes between changes arising from fresh borrowing and those resulting from currency movements.
Private-Sector Borrowing Continued to Drive External Financing
The increase in external debt was driven primarily by the non-government sector, while outstanding government external debt declined marginally during the year. Non-financial corporations remained the largest borrowers, accounting for 36.4% of total external debt, followed by deposit-taking corporations (26.5%), the general government (22%) and other financial corporations (10.2%). This suggests that higher external financing reflected growing corporate funding requirements rather than increased sovereign borrowing.
Debt Composition Continues to Support External Stability
The report indicates that India’s external debt profile remains relatively stable despite the increase in outstanding liabilities. Long-term debt accounted for 80.4% of total external debt, limiting refinancing pressures, while loans remained the largest financing instrument (34.7%), followed by currency and deposits, trade credit and debt securities. The US dollar remained the principal borrowing currency, although nearly one-third of liabilities were denominated in Indian rupees, reducing overall currency exposure.
Debt Sustainability Indicators Remain Favourable
Although the external debt-to-GDP ratio increased modestly to 20.8%, broader sustainability indicators remained comfortable. The debt service ratio improved from 6.6% to 5.8%, indicating that principal and interest payments absorbed a smaller share of current external receipts than a year earlier. At the same time, debt falling due within one year on a residual maturity basis amounted to 42.9% of total external debt and 47.3% of foreign exchange reserves, reinforcing the importance of maintaining adequate reserve buffers to manage rollover risks during periods of global financial volatility.
What is External Debt?
External debt refers to the outstanding financial liabilities owed by residents —including governments, corporations, banks and other entities — to non-residents that require repayment of principal and/or interest. It is one of the principal indicators used to assess a country’s external financing position, debt sustainability and resilience to global financial shocks.
Policy Relevance
Demonstrates that the recent increase in external debt was driven primarily by private-sector borrowing, while government external debt remained broadly stable.
Reinforces that debt quality matters alongside debt size, with India’s external debt continuing to be dominated by long-term borrowing and supported by an improving debt service ratio.
Highlights the importance of distinguishing valuation effects from actual borrowing, as exchange-rate movements can materially influence headline external debt figures.
Underscores the need to maintain adequate foreign exchange reserves to manage rollover risks associated with short-term obligations measured on a residual maturity basis.
Provides policymakers with a comprehensive framework for monitoring sectoral borrowing patterns, currency exposure, financing instruments and debt sustainability, rather than relying solely on aggregate debt levels.
Indicates that India’s external debt-to-GDP ratio of 20.8% remains well below historical highs, suggesting that external leverage has increased only moderately while overall external sector resilience remains intact.
Follow the Full Release Here: India’s External Debt as at the end of March 2026