Key Amendments of Foreign Exchange Management (Borrowing and Lending) Regulations, 2026

Key Amendments and Regulatory Changes

Expansion of Eligible Borrower Base

The amended regulations substantially broaden the scope of eligible borrowers. While traditional entities remain eligible, the regulations now expressly clarify that Limited Liability Partnerships (LLPs) can avail ECBs. Additionally, entities under restructuring schemes or corporate insolvency resolution processes may raise ECB if expressly allowed under the approved plan. Notably, borrowers facing investigation, adjudication, or appeal by law enforcement agencies may continue to access ECB without prejudice to investigation outcomes, provided such proceedings are disclosed in Form ECB-1.

Recognized Lenders—Liberalized Definition

The definition of recognized lenders has been significantly liberalized. ECBs may now be availed from: (i) any person resident outside India; (ii) a branch outside India of an entity whose lending business is RBI-regulated; and (iii) financial institutions or their branches established in International Financial Service Centres (IFSC). Notably, the erstwhile requirement that lenders be residents of FATF or IOSCO-compliant jurisdictions no longer applies, thereby widening access to global capital markets.

Borrowing Limits—Enhanced Headroom

The ECB borrowing limits have been substantially enhanced. Eligible borrowers may now raise ECB up to the higher of: (a) outstanding ECB of USD 1 billion, or (b) total outstanding borrowing (external and domestic, excluding non-fund based credit and compulsorily convertible instruments) not exceeding 300% of net worth as per the last audited standalone balance sheet. This represents a significant increase from the erstwhile USD 750 million limit and does not apply to borrowers regulated by financial sector regulators, thereby affording financial institutions substantially greater flexibility.

Standardization of Minimum Average Maturity Period (MAMP)

The amended framework establishes a uniform default MAMP of three years for all borrowers. However, manufacturing entities are permitted to avail ECBs with MAMP between 1–3 years, subject to the outstanding amount not exceeding USD 150 million. Critically, call and put options shall not be exercisable prior to completion of MAMP. MAMP is expressly not applicable in specified circumstances, including: (i) conversion of ECB to non-debt instruments; (ii) repayment through FDI proceeds; (iii) lender waiver; and (iv) corporate actions such as merger, demerger, amalgamation, arrangement, or acquisition of control.

Market-Aligned Pricing and Related Party Framework

The concept of all-in-cost ceiling has been removed entirely. Cost of borrowing shall now be determined in accordance with prevailing market conditions. For ECBs with MAMP less than three years, cost of borrowing shall comply with trade credit pricing benchmarks (FCY: benchmark + 300 basis points; INR: benchmark + 250 basis points). Critically, ECBs from related parties (replacing the erstwhile Foreign Equity Holder framework) must be priced on an arm’s length basis, requiring enhanced transfer pricing documentation.

Liberalization of End-Use Restrictions

The amended framework introduces substantial carve-outs to previously restrictive end-use provisions:

Securities Transactions: ECB proceeds may now be utilized for transactions in listed and unlisted securities, but only in connection with strategic corporate actions (merger, demerger, amalgamation, arrangement, acquisition of control) conducted in accordance with the Companies Act, Takeover Code, SARFAESI, and Insolvency and Bankruptcy Code, 2016, and only where such transactions are driven by long-term value creation rather than short-term gains.

Real Estate and Infrastructure: ECB proceeds are now permissible for: (i) purchase, sale, or lease of land for construction development or commercial/residential properties for own use; (ii) industrial parks meeting specified criteria; and (iii) construction development projects with developed trunk infrastructure. Restrictions on agricultural and plantation activities remain, except for specified crops.

Refinancing Framework and Debt Conversion

Refinancing of ECB is now permissible on liberalized terms, with the sole condition that refinancing must not breach the MAMP requirement applicable to the original borrowing. No additional MAMP shall apply to refinancing transactions. Conversion of ECB to equity or non-debt instruments is facilitated under this framework, though restructuring prudential regulations shall apply in instances of financial difficulty.

Procedural Enhancements: ECB Proceeds and Reporting

ECB proceeds may be held in designated accounts and invested in unencumbered fixed deposits (tenor up to one year) pending utilization, providing operational flexibility. For INR-denominated expenditure, proceeds must be credited to an INR account within the succeeding month; for FCY expenditure, proceeds may be held in FCY accounts in India or abroad as permitted.

Reporting compliance has been substantially simplified: Monthly Form ECB-2 submissions have been replaced with event-based reporting. Form ECB-2 must now be filed within seven calendar days from the end of the month in which any drawdown occurs or debt servicing is undertaken. The regulations also introduce provisions for classifying borrowers as “untraceable” if they fail to file specified returns for four consecutive quarters, with such borrowers being reported to the RBI and Directorate of Enforcement.

Conclusion

The amended ECB framework represents RBI’s commitment to modernizing India’s cross-border borrowing regime while maintaining regulatory prudence. By standardizing key parameters, expanding eligibility, and removing prescriptive constraints, the amendments facilitate greater predictability and operational flexibility for compliant borrowers. Organizations contemplating ECB should reassess their funding strategies in light of these liberalizations, particularly regarding borrowing limits, maturity periods, related party pricing, and end-use flexibility.