RBI notifies amended ECB framework, eases cost and maturity norms

The central bank said the regulations were finalised after examining feedback received from stakeholders on the draft framework released on October 3, 2025

The Reserve Bank of India (RBI) on Monday notified the Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026, introducing a series of changes to the external commercial borrowing (ECB) framework.

 

The amended regulations seek to rationalise the ECB regime through expansion of the eligible borrower and recognised lender base, rationalisation of borrowing limits and restrictions on average maturity, removal of restrictions on the cost of borrowing for ECBs, a review of end-use restrictions, and simplification of reporting requirements, the regulator said in a release.

 

The RBI said the regulations were finalised after examining feedback received from stakeholders on the draft framework released on October 3, 2025. It has also published its response to major comments received, annexed to the notification.

 

Among the key changes accepted by the central bank, the requirement to maintain a “current account” to qualify as a designated authorised dealer (AD) bank has been removed. The RBI clarified the end-use of ECB proceeds, including utilisation for the purchase of land and immovable property, subject to specified restrictions, and confirmed that acquisition of “control” is a permitted end-use. RBI-regulated entities will be allowed to on-lend ECB funds to individuals, though on-lending for real estate business, as defined in the regulations, will not be permitted.

 

The RBI also accepted suggestions to clarify the treatment of investments by foreign venture capital investors (FVCIs), short-term borrowing limits for manufacturing companies, the treatment of various convertible instruments and refinancing ECBs for the calculation of outstanding borrowings, and the manner of computing minimum average maturity. It has removed the requirement for designated AD banks to assess whether borrowing costs are aligned with prevailing market conditions, and eased provisions relating to refinancing following the removal of the all-in-cost cap.

 

However, several suggestions were not accepted. The RBI declined to provide a specific list of eligible entities permitted to raise ECBs, stating that eligibility would continue to be determined based on principles laid down in the regulations. It also rejected requests to permit ECB funds for on-lending to real estate business, remove the arm’s length compliance requirement, extend the benefits of the revised framework to existing ECBs, and issue separate operational guidelines for borrowings from Financial Action Task Force (FATF) non-compliant jurisdictions, noting that existing KYC/AML norms already apply.

 

The amended regulations will apply prospectively. Existing ECBs will continue to be governed by the framework under which they were raised, although reporting for all ECBs will follow the timelines prescribed under the revised regulations. 

Rulebook 2.0

 

• ‘Current account’ criteria to qualify as an authorised dealer bank removed
• RBI-regulated entities can on-lend ECB funds to individuals, but not for real estate business
• Existing ECBs stay under old norms, but reporting shifts to the new timeline