Relaxed ECB norms may lift foreign borrowings by Indian companies

RBI's easing of ECB rules-expanding eligibility, lifting limits and removing pricing caps-is expected to spur offshore fundraising, especially as refinancing demand rises

The easing of external commercial borrowing (ECB) norms by the Reserve Bank of India (RBI) is expected to significantly boost overseas fundraising by Indian companies, market participants said.

 

The revised framework widens the pool of eligible borrowers and recognised lenders, raises borrowing limits, relaxes maturity restrictions, and removes the cap on the all-in-cost for certain ECB categories. The changes are aimed at making the regime more flexible and aligned with evolving global funding conditions.

 

Under the amended rules, companies can raise up to $1 billion or 300 per cent of their net worth, substantially enhancing headroom for large corporates to tap foreign capital markets. The removal of pricing caps for longer-tenor borrowings allows firms to negotiate rates based on market conditions rather than regulatory ceilings, improving execution flexibility.

 

“The new ECB norms are largely an opening-up exercise by the RBI. Earlier, the end-use of funds was restricted to specific activities, but now the framework allows for a wider set of applications, which is a positive move. This should support higher volumes and potentially lead to an increase in the number of issuances,” said Umesh Revankar, executive vice chairman, Shriram Finance.

 

“That said, the actual uptake will depend on market appetite and overall liquidity conditions. At present, onshore liquidity is comfortable, so companies may tap overseas markets mainly if they are looking to scale up significantly or access larger pools of capital,” he added.

 

The central bank has rationalised minimum average maturity requirements and broadened end-use provisions. Companies can now deploy ECB proceeds more freely, including for refinancing existing debt and supporting expansion plans. Market participants said this could encourage firms to replace higher-cost domestic borrowings with cheaper offshore loans, particularly if global interest rate cycles turn favourable.

 

Data from the RBI shows that total ECBs raised between April and December 2025 stood at $27.5 billion.

 

Indian companies, including non-banking financial companies (NBFCs), filed proposals with the central bank to raise $4.43 billion through ECBs and foreign currency convertible bonds (FCCBs) in December 2025, the highest amount recorded so far in the current financial year of 2025-26 (FY26).

 

Among the prominent firms filing intent in December was Indian Railway Finance Corporation Ltd, which sought to raise $299.5 million for infrastructure development.

 

“The New ECB regulation is a game-changer. This is the ‘1991 moment’ for Indian M&A and credit markets as it gives birth to a new LBO (leveraged buyout) market in India, bringing the country on a par with the US, UK, and others. Under the new regulations, ECB can be raised for acquisition finance…,” said Ashwin Bishnoi, partner at Khaitan & Co.

 

With the new relaxations in place and refinancing demand picking up, bankers expect a sharp increase in issuance volumes. Infrastructure, renewable energy, and large conglomerates with global operations are seen as potential beneficiaries.

 

Analysts said the move could deepen integration between Indian corporates and global capital markets, diversify funding sources, and reduce pressure on domestic liquidity. However, they cautioned that currency risk and global rate volatility will remain key considerations for borrowers.

 

“It should lead to increase in volume and issuances, but one has to also factor in variables such as hedging cost. From a diversification of funding perspective, it is always good to expand the types of funding,” said Karan Gupta, director and head of financial institutions, India Ratings.