On February 16, 2026, the Reserve Bank of India (“RBI”) notified the Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026 (“Amended Regulations”). The Amended Regulations formalise and codify the extensive changes to the External Commercial Borrowing (“ECB”) regime, which was previously governed by the Master Direction – External Commercial Borrowings, Trade Credits and Structured Obligations dated March 26, 2019 (“Erstwhile Directions”). All ECB-related provisions have accordingly been omitted from the Erstwhile Directions, and the Amended Regulations now constitute the comprehensive and self-contained legal framework governing ECBs in India.
Substantively, the revised framework reflects a calibrated liberalisation of the ECB regime, intended to enhance access to offshore capital while retaining necessary macro-prudential safeguards. The Amended Regulations streamline procedural requirements, reduce interpretational ambiguities, and introduce greater structuring flexibility for borrowers and lenders. They also rationalise end-use, eligibility and compliance norms in line with evolving market practice, clarify approval and reporting processes to facilitate faster execution, and permit commercially negotiated, market-determined terms within defined regulatory parameters.
The regulatory shift reflects a broader policy emphasis on ease of doing business and the deepening of cross-border capital flows and the Amended Regulations seek to position ECBs as a competitive and credible alternative to domestic borrowings and other capital-raising avenues.
Some of the key Changes under the Amended Regulations are as under:
| Parameters | Amended Regulations | Erstwhile Directions |
|---|---|---|
| Eligible Borrower | (1) Any person resident in India and incorporated or registered under a Central or State statute is permitted to raise ECBs subject to compliance with its governing statute. (2) Further, eligible borrowers include those: (i) undergoing insolvency resolution or restructuring may avail ECBs if permitted under the applicable plan, and; (ii) facing investigation or appeal under FEMA may raise ECBs without prejudice to such proceedings, subject to disclosure in Form ECB-1. | All entities eligible to receive FDI in terms of Foreign Exchange Management (Transferor Issue of Security by a Person Resident Outside India) Regulations, 2017. |
| The eligibility framework has been intentionally broadened and decoupled from FDI-linked thresholds. This marks a clear policy shift toward expanding access to offshore capital and creating a self-contained, clarity-driven eligibility standard. Notably, LLPs and entities under restructuring now have express recognition. | ||
| Recognized Lender | Recognized Lenders include: (a) A person resident outside India;(b) A branch outside India of an entity whose lending business is regulated by the Reserve Bank; and(c) A financial institution or a branch of a financial institution set up in IFSC. | Lenders required to be from Financial Action Task Force (FATF) or International Organization of Securities Commissions (IOSCO) compliant countries. Multilateral and Regional Financial Institutions where India is a membercountry also considered as recognised lenders. Foreign branches or subsidiaries of Indian banks permitted to extend only foreign currency ECBs. Individuals were generally recognised only if they were foreign equity holders. |
| The scope of recognised lenders has been materially expanded, removing jurisdiction-based rigidity and equity-holder limitations. This enhances lender diversity and permits broader cross-border financing relationships, including related-party funding (at an arm’s length basis). | ||
| Borrowing Limits | Raising of ECBs 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. The aforesaid borrowing limit shall not be applicable on eligibleborrowers that are regulated by financial sector regulators. ECB for re-financing shall not form part of the borrowing limit. | Raising of ECBs limited till up to USD 750 million or equivalent per financial year. |
| The revised framework significantly enhances borrowing capacity and aligns limits with the borrower’s balance sheet strength. It reflects a shift toward principle-based prudential alignment rather than fixed monetary caps, while granting regulated financial entities greater flexibility. | ||
| Currency Flexibility | (1) An eligible borrower may raise ECB denominated in foreign currency (FCY) or Indian Rupee (INR). (2) Currency of ECB may be changed from one FCY to another FCY, an FCY to INR and INR to an FCY. | ECB can be raised in any freely convertible foreign currency as well as in Indian Rupees or any other currency as specified by the Reserve Bank in consultation with the Government of India. |
| Bidirectional currency conversion materially enhances structuring flexibility and allows borrowers to better manage currency exposure in response to market conditions. | ||
| MAMP (Minimum Average Maturity Period) | The MAMP has now been standardised at three years across categories, with the manner of computation prescribed under Annexure I to the Amended Regulations.However, an eligible borrower in the manufacturing sector may raise ECBs with an average maturity of between one and three years, subject to the condition that the aggregate outstanding amount of such short-term ECBs does not exceed USD 150 million.Further, the Amended Regulations set forth specific carve-outs where the above MAMP requirement shall not apply, thereby recognising defined exclusion scenarios under which MAMP requirements are relaxed. | Under the Erstwhile Directions, the MAMP operated on a bifurcated basis depending on the nature and end-use of the ECB. While a general MAMP of three years applied, certain specified categories, determined primarily by end-use, were subject to longer maturities of five, seven, or ten years, as applicable. Additionally, manufacturing companies were permitted to avail ECBs with a reduced MAMP of one year, provided the borrowing did not exceed USD 50 million or its equivalent per financial year. |
| The overhaul replaces a fragmented maturity structure with a standardised baseline and defined exceptions, promoting regulatory simplicity while retaining prudent sectoral relaxations. | ||
| End-Use Criteria | The Amended Regulations introduce significant liberalisation of the end-use restrictions. Under the Erstwhile Directions, ECBs were subject to a blanket prohibition on utilisation for equity investments. The revised framework now permits ECB proceeds to be deployed for equity investments involving the acquisition of control in a target company. Further, the Amended Regulations carve out specific relaxations for real estate development projects and industrial parks that satisfy prescribed conditions. In such cases, ECB financing may now be availed, including for the purchase, sale, or lease of land forming part of the approved project. | The Erstwhile Directions prescribed a detailed negative end-use list notified by the RBI, accompanied by multiple sectoral and activity-based restrictions. |
| The regime reflects a structural policy shift from prohibition-driven regulation to conditional permissibility, expanding strategic deployment of ECB proceeds, particularly for M&A and infrastructure-linked projects. | ||
| Reporting Requirements | Borrowers are required to file Form ECB 1 for providing details of the ECB and obtaining the Loan Registration Number (“LRN”). Any change in parameters must be reported through a Revised Form ECB 1 within seven calendar days from the end of the month in which such change is effected. Additionally, Form ECB 2 must be submitted within seven calendar days from the end of the relevant month in respect of receipt of ECB proceeds or debt servicing transactions. | Reporting operated as a recurring monthly compliance requirement. |
| The revised framework formalises and event-aligns reporting obligations. | ||
| Pricing | The cost of borrowing, and prepayment charges or penal interest, if any, for default or breach of covenants shall be in line with prevailing market conditions. | Prescribed ceiling on all-in-cost as well as the ceiling on prepayment charges and penalties. |
| Moves from fixed regulatory cost caps to a market-determined pricing framework, increasing commercial flexibility. | ||
In addition to the aforesaid, the Amended Regulations, inter alia, extend further to rationalising hedging requirements, conversion of ECBs into non-debt instruments, refinancing norms, and participation by foreign venture capital investors.
Taken together, the Amended Regulations signal a clear shift toward a more mature and facilitative external borrowing regime. The RBI has moved beyond incremental adjustments and has instead, through the Amended Regulations, sought to deliver structural clarity, regulatory coherence, and transactional flexibility across the ECB lifecycle. By recalibrating key parameters across eligibility, end use, pricing, and transaction mechanics, while retaining prudential oversight, the RBI has sought to align the regime more closely with evolving market realities. The long term impact of these changes will ultimately depend on market uptake and regulatory implementation, but the framework marks a significant step in the continued evolution of India’s external commercial borrowing landscape.
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