RBI notifies amendments to the ECB Framework

The Reserve Bank of India (RBI) has, vide press release dated February 16, 2026, issued the Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026 (Amendment Regulations), to amend the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018, in order to rationalize the regime governing external commercial borrowings (ECB).

The Amendment Regulations have further consolidated the relevant provisions pertaining to ECBs under the ‘Master Direction – External Commercial Borrowings, Trade Credits and Structured Obligations’ (ECB Master Directions) as well as the relevant provisions related to borrowing in Indian Rupees (INR) by ‘persons resident in India’ under the ‘Master Direction – Borrowing and Lending transactions in Indian Rupee between Persons Resident in India and Non-Resident Indians/ Persons of Indian Origin’. Accordingly, all aspects relating to ECBs have been omitted under the updated ECB Master Directions published by the RBI and consolidated under the Amendment Regulations. The Amended Regulations have rationalised the ECB framework by expansion of eligible borrower and recognised lender base, rationalisation of borrowing limits and restrictions on average maturity period, among others.

The key aspects notified by the RBI include, inter alia, the following:

1. Scope of ‘Eligible Borrower’: The scope of ‘eligible borrower’ has been broadened to, inter alia,include ‘any person resident in India (other than an individual) that is incorporated, established or registered under a Central or State Act is an eligible borrower, subject to the condition that such person is permitted for ECB in terms of applicable Act(s)’.

2. Scope of ‘Recognised Lender’: The scope of ‘recognised lender’ has been expanded and pursuant to the Amendment Regulations, an eligible borrower is now permitted to raise ECB from:

• • a person resident outside India;

• • a branch outside India of an entity whose lending business is regulated by the Reserve Bank; and

• • a financial institution or a branch of a financial institution set up in International Financial Services Centres.

Accordingly, the earlier requirement for such lender to be a resident of Financial Action Task Force or International Organization of Securities Commission-compliant country, has now been removed.

3. Change in currency of borrowing: A change of currency of ECB has now been permitted – from one Foreign Currency (FCY) to another FCY, an FCY to Indian Rupees (INR) and INR to an FCY. Further, such change of currency shall be at the exchange rate prevailing on the date of the agreement for such change or at an exchange rate which does not result in a liability higher than that arrived at by using the exchange rate prevailing on the date of the agreement.

4. Enhanced borrowing limits: The borrowing limits for raising ECBs have been increased under the Amendment Regulations. An eligible borrower may raise ECB up to the higher of: (a) outstanding ECB up to USD 1 billion; or (b) total outstanding borrowing (external and domestic) up to 300 per cent of net worth as per the last audited standalone balance sheet of the borrower. 

5. Maturity: An eligible borrower shall raise ECB with minimum average maturity period (MAMP) of three years. Further, an eligible borrower engaged in manufacturing sector may also raise ECB with average maturity period between one year and three years, subject to the condition that outstanding amount of such ECBs shall not exceed USD 150 million.

The aforesaid MAMP stipulations shall not be required to be met in inter alia the following cases –

• • Conversion of ECB (including Foreign Currency Convertible Bonds and Foreign Currency Exchangeable Bonds ) to non-debt instruments in accordance with the rules and regulations issued under Foreign Exchange Management Act, 1999;
  • Repayment of ECB using the proceeds from non-debt instruments issued in terms of Foreign Exchange Management (Non-Debt Instrument) Rules, 2019 on repatriation basis, provided the proceeds are received after the drawdown of the ECB;
  • Waiver of debt by the lender;
  • Repayment of ECB, if required, for undertaking corporate actions such as closure, merger, demerger, arrangement, acquisition of control, amalgamation, resolution or liquidation by the lender or the borrower.

The aforesaid borrowing limit is also not applicable to eligible borrowers that are regulated by financial sector regulators (such as RBI, SEBI, IRDAI, etc.). 

6. Restriction on End-use:The list of prohibited end use of borrowed funds has been liberalized, and the updated list on end-use restrictions includes, inter alia, the following:

• • Transacting in listed/unlisted securities, except for transactions undertaken by an Indian entity for corporate actions such as merger, demerger, amalgamation, arrangement, or acquisition of control in accordance with the Act under which the entity is incorporated/established, Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Insolvency and Bankruptcy Code, 2016, as applicable.

• • Repayment of a domestic INR loan: (i) which was availed for an end-use restricted under these regulations; or (ii) which is classified as a non-performing asset as per the applicable prudential norms.

• • On-lending for any of the purposes for which funds cannot be borrowed and utilized under these regulations.

For more details, kindly refer to the Amendment Regulations by clicking on this link.