RBI notifies amended ECB framework, eases cost and maturity norms

Reserve Bank Eases Rules for Overseas Borrowing

The Reserve Bank of India has rolled out significant updates to its external commercial borrowing framework, aiming to make it easier for Indian companies to tap into global funds.

Under the new Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026, notified on Monday, businesses can now raise up to $1 billion or 300 percent of their net worth—whichever is higher—in a single year. This marks a jump from the previous annual cap of $750 million, giving firms more room to finance expansion without heavy reliance on domestic resources.

The changes come after the RBI reviewed feedback from stakeholders on a draft released in October 2025, incorporating suggestions while holding firm on key safeguards. Banks no longer need to check if borrowing costs match market rates, freeing up the process and potentially lowering hurdles for deals.

Key Changes in Limits, Costs, and Maturity

One of the standout shifts is the complete removal of restrictions on borrowing costs, allowing market-driven rates for these loans.

Previously, there were caps on all-in-costs, but now fixed-rate loans just need to stay within a floating rate plus swap spread ceiling, offering flexibility amid volatile global interest rates. On maturity, the minimum average period remains three years, but manufacturing companies get a break—they can opt for loans between one and three years if their outstanding balance stays under $150 million.

Eligible borrowers now include a broader range, like entities under central or state acts, even those in restructuring or under investigation, as long as they disclose details. Recognized lenders expand to overseas branches of Indian banks and institutions in international financial services centers. Reporting gets simpler too, cutting red tape for everyone involved.

said an industry expert familiar with the discussions.

These amendments rationalise the ECB regime by expanding eligibility, easing limits on maturity and costs, and streamlining compliance, which should boost access to cheaper global capital for genuine business needs,

Retained Safeguards and End-Use Limits

While the updates bring relief, the RBI has kept tight controls on how borrowed money can be used to prevent misuse.

Funds still can't go toward real estate, chit funds, Nidhi companies, farmhouses, trading development rights, or speculating in non-strategic securities. Repaying bad domestic loans is off-limits too, though some agricultural activities like controlled horticulture are okay. This ensures overseas cash fuels productive growth rather than risky ventures.

Suggestions to allow on-lending to real estate or extend benefits to old ECBs were turned down, as were calls for a fixed list of eligible entities—the RBI prefers principle-based criteria. For financial firms like NBFCs under sector regulators, the higher $1 billion limit doesn't apply, maintaining caution there. These balances reflect the central bank's aim to liberalize without compromising stability.

The framework also aligns with broader FEMA updates on guarantees, smoothing cross-border deals.

Overall, these tweaks position Indian companies better in a competitive global landscape, potentially spurring investments in manufacturing and infrastructure. By hiking limits, ditching cost checks, and flexing maturity rules while guarding end-uses, the RBI strikes a pragmatic path forward.