Revised ECB guidelines

The Reserve Bank of India (RBI) has issued the Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026 on 9 February 2026, introducing significant revisions to the External Commercial Borrowing (ECB) framework. These regulations came into effect from the date of their publication in the Official Gazette, i.e., 16 February 2026.

ECBs for which a Loan Registration Number (LRN) had been obtained prior to the coming into force of these amended regulations will continue to be governed by the regulations applicable at the time of obtaining the LRN. However, reporting requirements for such ECBs shall be governed by the amended regulations.

Key Highlights of the Revised ECB Guidelines, 2026

1. Borrowing Limits

Eligible borrowers may raise ECB under the automatic route up to the higher of: (i) USD 1 billion outstanding; or

(ii) total outstanding borrowings (external plus domestic) up to 300% of their net worth, as per the latest audited financial statements of the borrower.

Previously, the ECB borrowing limit under the automatic route was USD 750 million.

2. Removal of All-in-Cost Ceiling

The earlier cap on interest rates and fees (all-in-cost) for ECBs has been removed. Borrowing costs, including interest rates and fees, will now be determined based on prevailing market conditions.

3. Standardized Minimum Average Maturity Period (MAMP)

The Minimum Average Maturity Period (MAMP) has been standardised at 3 years.

However, a relaxation has been provided for manufacturing companies, where MAMP may range between 1 to 3 years for outstanding ECBs up to USD 150 million.

4. Expanded Eligibility

Borrowers:

• Any Indian resident entity (other than individuals) incorporated under a Central or State Act is now eligible to raise ECB.
• Investments received through Foreign Venture Capital Investors (FVCI) are expressly excluded from the ECB framework.
• A resident individual may borrow in INR from a Non-Resident Indian (NRI) or an Overseas Citizen of India (OCI) who is a relative, provided such borrowing is on a non-repatriation basis.

Lenders:

• Any non-resident person is now eligible to act as a lender under the ECB framework.

5. End-use Flexibility

• The revised regulations do not prescribe a positive list of permissible end-uses. Instead, they provide a negative list, specifying activities for which ECB proceeds cannot be utilised.
• Certain liberalised permissions have been introduced for utilisation of ECB funds in real estate and infrastructure businesses.
• ECB proceeds may also be used for strategic corporate actions such as mergers, demergers, amalgamations, arrangements, and acquisition of control.

Prohibited Uses:

ECB proceeds cannot be used for:

• Chit funds
• Nidhi companies
• General investment in the capital market

However, specific exceptions have been provided for utilisation of ECB proceeds in real estate business, agriculture, and animal husbandry.

Parking of Funds:

Pending utilisation, ECB proceeds may be parked in unencumbered fixed deposits with an Authorised Dealer Category-I bank for a period of up to one year.

6. Related Party Loans

ECB availed from foreign equity holders or other related parties must be on arm’s length terms.

7. Reporting Requirements

• Form ECB-1: To be filed for providing details of the ECB and obtaining the Loan Registration Number (LRN).
• Revised Form ECB-1: To report any change in previously reported ECB parameters within seven calendar days from the end of the month in which such change takes effect.
• Form ECB-2 (Event-based reporting):
  • Monthly reporting has been replaced with event-based reporting.
  • Form ECB-2 must be submitted within seven calendar days from the end of the month in which ECB proceeds are received or debt servicing is undertaken.
    • Debt servicing includes:
      • Remittance of principal amount
      • Interest payments
      • Payment of other charges
      • Repayment of ECB to an NRO account
  • Any event or transaction that alters the outstanding borrowing under an LRN shall also be reported in Form ECB-2.

8. Conversion of ECB

ECB may be converted into equity or other non-debt instruments, subject to compliance with the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019.

Such conversion is subject to the following conditions:

• Prior consent of the lender must be obtained.
• No additional cost should be payable to the lender for facilitating the conversion.
• The ECB liability eligible for conversion into non-debt instruments shall be determined based on:
  • the exchange rate prevailing on the date of the conversion agreement, or
  • any exchange rate that does not result in a liability higher than that determined using the exchange rate prevailing on the date of such agreement.