RBI liberalises ECB norms, raises borrowing limits, removes cost caps; check details
Under the revised guidelines, eligible borrowers can now raise ECBs up to the higher of $1 billion in outstanding borrowings or 300% of their net worth, based on the latest audited standalone balance sheet.
- Feb 17, 2026,
- Updated Feb 17, 2026 1:48 PM IST
The Reserve Bank of India (RBI) has overhauled its External Commercial Borrowings (ECB) framework, raising borrowing limits, easing maturity norms and removing cost ceilings, a move expected to make overseas funding more attractive for Indian companies amid volatile global capital flows.
Under the revised guidelines, eligible borrowers can now raise ECBs up to the higher of $1 billion in outstanding borrowings or 300% of their net worth, based on the latest audited standalone balance sheet. This marks a significant increase from the earlier cap of $750 million. The changes come at a time when ECB activity has been rising steadily, with Indian companies raising a record $61 billion through the ECB route in FY25, up from $48 billion in FY24.
The central bank clarified that non-fund-based facilities and mandatorily convertible equity instruments will be excluded while calculating the borrowing cap, effectively expanding the headroom available to corporates.
External commercial borrowings are commercial loans raised by eligible Indian entities from recognised non-resident lenders and are governed by parameters such as maturity, permitted end-use and pricing.
Relaxed pricing restrictions
RBI has also relaxed pricing restrictions, removing the overall cap on the cost of borrowing and allowing ECB pricing to align with prevailing market conditions. However, for ECBs with an average maturity of less than three years, borrowing costs must comply with the cost ceilings prescribed for trade credits. In the case of fixed-rate loans, the floating benchmark plus the corresponding swap spread should remain within the applicable ceiling. Prepayment charges or penal interest for defaults or covenant breaches will also be governed by market conditions.
Maturity norms
On maturity norms, the revised framework stipulates a minimum average maturity period (MAMP) of three years. However, manufacturing companies have been allowed to raise ECBs of up to $150 million with maturities between one and three years, providing greater flexibility for short-term funding needs.
The RBI has also introduced operational flexibility in fund utilisation. ECB proceeds intended for rupee expenditure must be parked in an INR account within one month of drawdown, with surplus funds eligible for investment in unencumbered fixed deposits for up to one year. Funds earmarked for foreign currency expenditure may be retained in domestic or overseas foreign currency accounts and invested in short-term debt instruments with an original maturity of up to one year.
Raising funds
In a significant relaxation, the central bank has permitted borrowers undergoing restructuring or those admitted under the corporate insolvency resolution process to raise funds through the ECB route. Further, the eligible borrower universe has been expanded to include entities against whom investigations, adjudication or appeals are pending under laws administered by enforcement agencies, subject to mandatory disclosure of such proceedings.
The revised norms also allow ECBs to be secured by charges on immovable, movable, financial and intangible assets, including intellectual property rights, as well as guarantees issued in accordance with the Foreign Exchange Management (Guarantees) Regulations, 2026.
Non-resident entities
Eligible borrowers may raise ECBs from non-resident entities, overseas branches of RBI-regulated lenders, and financial institutions or branches operating in International Financial Services Centres (IFSCs). Borrowings may be denominated in foreign currency or Indian rupees, with flexibility to change the borrowing currency from one foreign currency to another, or between foreign currency and INR.
The liberalisation comes against the backdrop of portfolio outflows driven by geopolitical uncertainty and fragmentation in global trade, which has exerted pressure on the rupee. Market participants expect the relaxed ECB framework to encourage Indian corporates to tap overseas markets, bring in dollar inflows and provide some support to the domestic currency.
The Reserve Bank of India (RBI) has overhauled its External Commercial Borrowings (ECB) framework, raising borrowing limits, easing maturity norms and removing cost ceilings, a move expected to make overseas funding more attractive for Indian companies amid volatile global capital flows.
Under the revised guidelines, eligible borrowers can now raise ECBs up to the higher of $1 billion in outstanding borrowings or 300% of their net worth, based on the latest audited standalone balance sheet. This marks a significant increase from the earlier cap of $750 million. The changes come at a time when ECB activity has been rising steadily, with Indian companies raising a record $61 billion through the ECB route in FY25, up from $48 billion in FY24.
The central bank clarified that non-fund-based facilities and mandatorily convertible equity instruments will be excluded while calculating the borrowing cap, effectively expanding the headroom available to corporates.
External commercial borrowings are commercial loans raised by eligible Indian entities from recognised non-resident lenders and are governed by parameters such as maturity, permitted end-use and pricing.
Relaxed pricing restrictions
RBI has also relaxed pricing restrictions, removing the overall cap on the cost of borrowing and allowing ECB pricing to align with prevailing market conditions. However, for ECBs with an average maturity of less than three years, borrowing costs must comply with the cost ceilings prescribed for trade credits. In the case of fixed-rate loans, the floating benchmark plus the corresponding swap spread should remain within the applicable ceiling. Prepayment charges or penal interest for defaults or covenant breaches will also be governed by market conditions.
Maturity norms
On maturity norms, the revised framework stipulates a minimum average maturity period (MAMP) of three years. However, manufacturing companies have been allowed to raise ECBs of up to $150 million with maturities between one and three years, providing greater flexibility for short-term funding needs.
The RBI has also introduced operational flexibility in fund utilisation. ECB proceeds intended for rupee expenditure must be parked in an INR account within one month of drawdown, with surplus funds eligible for investment in unencumbered fixed deposits for up to one year. Funds earmarked for foreign currency expenditure may be retained in domestic or overseas foreign currency accounts and invested in short-term debt instruments with an original maturity of up to one year.
Raising funds
In a significant relaxation, the central bank has permitted borrowers undergoing restructuring or those admitted under the corporate insolvency resolution process to raise funds through the ECB route. Further, the eligible borrower universe has been expanded to include entities against whom investigations, adjudication or appeals are pending under laws administered by enforcement agencies, subject to mandatory disclosure of such proceedings.
The revised norms also allow ECBs to be secured by charges on immovable, movable, financial and intangible assets, including intellectual property rights, as well as guarantees issued in accordance with the Foreign Exchange Management (Guarantees) Regulations, 2026.
Non-resident entities
Eligible borrowers may raise ECBs from non-resident entities, overseas branches of RBI-regulated lenders, and financial institutions or branches operating in International Financial Services Centres (IFSCs). Borrowings may be denominated in foreign currency or Indian rupees, with flexibility to change the borrowing currency from one foreign currency to another, or between foreign currency and INR.
The liberalisation comes against the backdrop of portfolio outflows driven by geopolitical uncertainty and fragmentation in global trade, which has exerted pressure on the rupee. Market participants expect the relaxed ECB framework to encourage Indian corporates to tap overseas markets, bring in dollar inflows and provide some support to the domestic currency.