RBI Liberalises ECB Framework
 

The Reserve Bank of India ("RBI") has issued FEM (Borrowing and Lending) (First Amendment) Regulations, 2026 ("Amendment Regulations"). The Amendment Regulations dated 9th February 2026 have now been notified in the official gazette and have become effective.

The Amendment Regulations have liberalized the existing external commercial borrowing (“ECB”) framework. This alert summarizes below the key changes brought by the Amendment Regulations:

Particulars	Revised Position
Eligible borrower	Following are considered as eligible borrower who can raise ECB: Any person resident in India (other than an individual) incorporated, established or registered under a Central or State Act is an eligible borrower, if permitted under governing regulations An eligible borrower that is under a restructuring scheme or corporate insolvency resolution process may raise ECB Major change: By virtue of the revised position now LLPs have been recognized as eligible borrowers for raising ECBs
Recognized lender	The recognised lenders are: A person resident outside India A branch outside India of an entity whose lending business is regulated by the Reserve Bank A financial institution or a branch of a financial institution set up in IFSC Major change: The language 'a person resident outside India' widens the scope of eligible lenders. Further, the erstwhile stipulation that lender should be resident of FATF or IOSCO compliant country no longer appears to apply.
End use restriction	ECB shall not be used for following purposes: Chit funds Nidhi Company Real Estate Business and construction of farm house Agricultural and animal husbandry Plantation Trading in transferable development rights Transacting in listed/unlisted equity Repayment of a domestic INR loan availed for restricted end-use or classified as NPAon-lending for any of the purposes for which funds cannot be borrowed and utilized in this regulation Major change: The end-use restriction list is revamped and liberalized. End use towards real estate business, agriculture and plantation is allowed subject to certain conditions.
Borrowing limit	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 Major change: The erstwhile ECB limit of USD 750 Million has been significantly enhanced. No ECB limits applicable to eligible borrowers regulated by financial sector regulators
Maturity	The minimum average maturity period (MAMP) for ECB is kept uniform at 3 years. Borrower engaged in the manufacturing sector can avail ECB with MAMP between 1 to 3 years MAMP shall not be applicable in the following cases: Conversion of ECB to a non debt instrument Repayment by utilizing proceeds of FDI funds Waiver of ECB by the lender Waiver of ECB by the lender Refinancing of ECB 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 Major change: MAMP has been rationalized and kept uniform for all categories of ECBs
Cost of borrowing	Now the cost of borrowing should be as per the prevailing market conditions and arm's length for related parties Major change: The concept of all-in-cost ceiling is removed and replaced with cost of borrowing. Prepayment charges or penal interest, if any, for default or breach of covenants shall be in line with prevailing market conditions
Reporting	Borrowers are required to submit Form ECB 1 for obtaining LRN Revised Form ECB 1 is required for reporting any change in previously reported ECB parameters Form ECB 2' for reporting receipt of ECB proceeds and debt servicing Provision with respect to late submission fee is introduced in regulations Major change: Monthly reporting in Form ECB-2 has been discontinued. Reporting is required only in the month in which (i) ECB proceeds are received; and (ii) debt servicing is undertaken.