Focus Point

Draft ECB Framework

The Reserve Bank of India (RBI) first introduced the External Commercial Borrowings (ECB) framework in the year 2000 under the Foreign Exchange Management Act (FEMA). This framework provided the initial regulatory structure governing borrowings by Indian entities from non-resident lenders in foreign currency.

Between 2000 and 2015, the RBI issued a series of Master Circulars on ECB, which consolidated and clarified the periodic guidelines relating to eligible borrowers, recognized lenders, permitted end-uses, and the Minimum Average Maturity Period (MAMP). These circulars served as a comprehensive reference for stakeholders and ensured consistency in implementation across sectors.

In 2018, the RBI overhauled the existing structure by introducing the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018, which replaced the earlier regulations from 2000. This new regulation simplified the ECB regime by combining various tracks of borrowing and aligning it with evolving international practices.

 

In 2022, the RBI again liberalized the ECB framework by increasing the automatic route borrowing limit from USD 750 million to USD 1.5 billion. It also temporarily relaxed the all-in-cost ceiling and introduced greater flexibility for borrowers, marking a significant step toward a more liberalized and market-aligned external borrowing regime.

The RBI issued a Draft Framework on ECB for Foreign Trade inviting public comments, vide Press Release No. 2025-2026/1235 dated 3 October 2025. The key comparisons between the draft regulations and the existing regulations are summarized below:

Particulars	Existing ECB Framework	Proposed ECB Framework	Observation
Eligible Borrowers	All entities are eligible to receive FDI. Further following entities are also eligible to raise ECB: - Port Trust Units in SEZ SIDBI EXIM bank of India	A PRI (Other than Individual) incorporated, registered, and permitted under a Central Act or State Act. An eligible borrower may also raise under a Corporate Insolvency resolution process if specifically permitted under the resolution plan. An eligible borrower may raise ECB even if any investigation, adjudication, or appeal by law enforcement agencies under the Act is pending, without prejudice to its outcome.	The scope for raising ECBs has now been expanded, for instance, even partnership firms are now eligible to raise ECBs. However, this remains subject to further clarification from the RBI. Earlier, eligibility for raising ECBs was linked to FDI norms, meaning only entities eligible to receive FDI were permitted to raise ECBs.
Recognized Lenders	The lender must be a resident of an FATF or IOSCO-compliant country, including in cases of ECB transfer. Additionally, Multilateral and regional financial institutions where India is a member are recognized lenders. Individuals are permitted only if they are foreign equity holders or subscribing to bonds/debentures listed abroad; and Foreign branches of Indian banks are recognized lenders only for FCY ECBs (excluding FCCBs/FCEBs), though they may act as arrangers, underwriters, or traders for rupee-denominated bonds issued overseas, except for issuances by Indian banks.	An eligible borrower may raise ECB from: - A person resident outside India. A branch outside India or in the IFSC of an entity whose lending business is regulated by the Reserve Bank.	The concept of a recognized lender under the proposed ECB framework has been made more liberal.
Minimum Average Maturity Period (MAMP)	The MAMP for ECBs ranges from 1 to 10 years, depending on the utilization.	Generally, the MAMP for ECBs is 3 years; however, for the manufacturing sector, it can range between 1 to 3 years, provided the outstanding ECB does not exceed USD 50 million.	The compliance burden related to MAMP has been reduced compared to the existing ECB framework. However, the provisions regarding the date of transition have not been clearly defined.
Limits	The limit for raising ECBs under the automatic route is USD 1.5 billion or its equivalent. Further, for FCY-denominated ECBs raised from a direct foreign equity holder, the ECB liability-to-equity ratio under the automatic route must not exceed 7:1. However, this ratio is not applicable where the outstanding ECB amount is up to USD 5 million.	ECB limit is higher of: - Outstanding ECB upto USD 1 Billion. Total Outstanding borrowing (external and domestic) up to 300 % of net worth as per; latest audited financial statements.	Under the proposed ECB framework, the borrowing limit is now clubbed with domestic borrowings and linked to the company’s net worth.
Cost of Borrowings	For FCY related ECB is benchmark rate plus 500 bps spread. For INR related ECB is Benchmark rate plus 450 bps spread.	The cost of borrowing should be in line with market condition subject to the satisfaction of AD category I Bank. Further ECB from related party shall be carried out on arm’s length basis.	The ceiling on the cost of borrowing has been replaced with the discretion vested in the AD Category I bank. Furthermore, under the new framework, ECBs raised from related parties must adhere to the arm’s length principle.