The Reserve Bank of India (RBI) has issued liberalised external commercial borrowing (ECB) guidelines, whereby India Inc can benefit from higher borrowing limit at prevailing market related conditions, change currency of an ECB, and convert the ECB into a non-debt instrument, among others.
Further, a borrower under a restructuring scheme or corporate insolvency resolution process can tap this route to raise funds.
This move comes at a time when the Indian financial markets are seeing outflows amid geopolitical uncertainties and fragmentation in global trade. This, in turn, is weakening the Rupee. But the liberalised ECB norms may prompt India Inc to tap overseas markets and bring in Dollars, helping stabilise the Rupee.
ECBs are commercial loans raised by eligible resident entities from recognised non-resident entities. These borrowings have conform to parameters such as minimum maturity, permitted and non-permitted end-uses, maximum all-in-cost ceiling, etc.
An eligible borrower can raise ECB up to the higher of outstanding ECB up to USD 1 billion; or 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.
There are no caps on cost of borrowing. The cost of borrowing shall be in line with prevailing market conditions.
However, in case of eligible ECBs with average maturity period of less than three years, the cost of borrowing shall be in compliance with cost ceiling specified for Trade Credit under these regulations. In the case of fixed rate loans, the floating rate plus spread of the corresponding swap shall not be more than the ceiling.
Prepayment charges or penal interest, if any, for default or breach of covenants shall be in line with prevailing market conditions.
RBI said ECBs may be secured by creation of charge on immovable assets, movable assets, financial assets and intangible assets (including intellectual property rights) in favour of the non-resident lender or security trustee; and issue of guarantee in favour of the lender or security trustee in accordance with the Foreign Exchange Management (Guarantees) Regulations, 2026, subject to conditions.
The RBI has expanded the eligible borrowers list to also include a borrower against whom any investigation, adjudication or appeal by a law enforcement agency for contravention of any rule, regulation or direction issued under the Act is pending.
Such borrowers may raise ECB notwithstanding the pending investigation or adjudication or appeal and without prejudice to the outcome of such investigation or adjudication or appeal. The borrower shall, however, disclose information about the pending investigation, adjudication or appeal.
An eligible borrower can raise ECB from – a person resident outside India; a branch outside India of an entity whose lending business is regulated by RBI; and a financial institution or a branch of a financial institution set up in IFSC.
While an eligible borrower may raise ECB denominated in foreign currency (FCY) or Indian Rupee (INR), the currency of such borrowing may be changed from one FCY to another FCY, a FCY to INR and INR to a FCY.
An eligible borrower shall raise ECB with minimum average maturity period (MAMP) of three years.
Published on February 16, 2026
