RBI Raises ECB Limit To USD 1 Bn Under Amended Framework

New Delhi, Feb 17 (KNN) The Reserve Bank of India (RBI) has issued the Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026, bringing significant changes to the External Commercial Borrowing (ECB) framework. 

The revised rules, finalised after stakeholder consultations on draft norms released in October 2025, aim to simplify and rationalise overseas fundraising.

Higher Limits, Wider Eligibility

Under the new framework, eligible entities can raise ECBs up to USD 1 billion or 300 per cent of their net worth, whichever is higher, compared with the earlier annual cap of USD 750 million. 

The RBI has expanded the pool of eligible borrowers and recognised lenders, permitting any entity incorporated under a Central or State Act to access ECBs, including those under restructuring or facing investigation, subject to disclosure requirements.

Recognised lenders now include persons resident outside India, overseas branches of RBI-regulated entities and financial institutions in International Financial Services Centres.

Maturity and Cost Norms

Borrowers must maintain a minimum average maturity period of three years. Manufacturing sector entities may raise ECBs with a maturity between one and three years, provided the outstanding amount does not exceed USD 150 million. 

The cost of borrowing will be market-determined. For fixed-rate loans, the floating rate plus swap spread must remain within the prescribed ceiling.

End-Use and Deployment of Funds

The regulations retain restrictions on certain end-uses. Borrowed funds cannot be used for chit funds, Nidhi companies, real estate business and construction of farmhouses, trading in transferable development rights, investment in securities for non-strategic purposes, or repayment of domestic loans classified as non-performing assets. Limited agricultural activities such as horticulture under controlled conditions and select plantations remain permitted.

ECB proceeds can be parked temporarily in deposits or debt instruments with a maturity of up to one year pending utilisation.

Reporting and Compliance

Borrowers must obtain a Loan Registration Number before drawdown and comply with revised reporting norms through designated Authorised Dealer Category-I banks. 

The amended rules also streamline reporting requirements and clarify procedures for refinancing, conversion into non-debt instruments, and security creation.

The regulations have been issued under the powers conferred by the Foreign Exchange Management Act, 1999, and will take effect fr0m the date of publication in the Official Gazette. 

Existing ECBs with prior registration will continue under earlier norms, except for reporting, which must align with the amended framework.

(KNN Bureau)