March 28, 2026

RBI, vide Notification No. FEMA 3(R)(5)/2026-RB dated 9 February 2026 (Published on 16 February 2026) read with A.P. (DIR Series) Circular No. 23 dated 18 February 2026 has recently amended the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 and Master Directions on External Commercial Borrowings (ECB), Trade Credit and Structured Obligations (“Amended ECB Framework”).

The Amended ECB Framework liberalizes the ECB regime by simplifying eligibility norms, standardizing the minimum average maturity period (“MAMP”), easing the end-use provisions, enhancing operational flexibility (including interest rate), and strengthening reporting and compliance framework.

The key amendments are summarized below:

1. No retrospective effect: ECBs availed prior to issuance of the Amended ECB framework will continue to be governed by the erstwhile regime, except for the reporting requirements.
   
2. Expanded scope of eligibility of borrowers: Any person resident in India—other than an individual—that is incorporated, established or registered under a Central or State Act and permitted under the applicable law may raise ECB. For instance, Limited Liability Partnerships (LLPs) are now eligible to raise ECB.
   
3. MAMP:
   
   • – Call/put options should not be exercised before completion of MAMP.
   • – MAMP has been standardized at 3 years, replacing the earlier end-use linked MAMP ranging from 3 to 10 years.
   • – Manufacturing entities may raise ECB with MAMP ranging between 1-3 years, subject to an outstanding cap of USD 150 million for such shorter-tenor borrowings.
   • – Call/put options should not be exercised before completion of MAMP.
   • – Prepayment prior to completion of prescribed MAMP should be permissible under the automatic route in specific cases outlined below:
     – – Conversion of ECB to a non-debt instrument, in accordance with the Foreign Direct Investment (FDI) policy;
     – – Repayment by utilizing proceeds of FDI funds;
     – – Waiver of ECB by the lender; -In case of closure, merger, demerger, arrangement, acquisition of control, amalgamation, resolution or liquidation by the lender or the borrower.
4. Increase in borrowing limits
   • – ECB limit has been increased from USD 750 million to the higher of USD 1 billion outstanding or 300% of net worth of the borrower, on a standalone basis.
   • – ECB limits should not apply to eligible borrowers regulated by financial sector regulators.
     
5. Liberalization of end-use restrictions
   • – Entities engaged in construction development are permitted to raise ECBs, subject to sale of plots only after completion of trunk infrastructure.
   • – Further, ECBs for development of industrial parks permitted subject to prescribed minimum units and allocable area requirements.
   • – The restriction on ‘real estate’ has been relaxed for, inter alia, infrastructure activities, specified own- se acquisitions and real estate broking services.
   • – ECB proceeds may also be used for purchase of securities undertaken as part of the strategic corporate actions, such as merger, demerger, amalgamation, arrangement or acquisition of control, in accordance with the applicable laws (i.e., Companies Act 2013, Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Insolvency and Bankruptcy Code, 2016).
     
6. All-in-cost ceiling: All-in-cost ceiling should be as per the prevailing market conditions, subject to arm’s length in case of related parties.
   
7. Exclusions: The Amended ECB Framework excludes the following from its scope, subject to compliance with the applicable regulations:
   • – Investments by a Foreign Venture Capital Investor (FVCI) in debt instruments;
   • – Investments received through convertible notes;
   • – Investment in debt instruments by non-residents such as Foreign Portfolio Investors (FPI);
   • – Export advances;
   • – Trade Credit with original maturity up to 3 years.
     
8. Parking of ECB proceeds
   
   • – INR expenditure: ECB proceeds should be credited to an INR account by the end of the succeeding month from receipt; pending utilization, funds may be parked in an unencumbered Fixed Deposit (FD) with the designated AD Bank for up to 1 year.
   • – Foreign currency (FCY) expenditure: ECB proceeds may be kept in an FCY account in India or abroad (as permitted) and temporarily invested outside India in an unencumbered FD or debt instrument with original maturity up to 1 year.
     
9. Reporting: Earlier Form ECB-2 has been shifted from monthly filing to event-based filing. It is to be submitted only upon utilization of ECB proceeds or undertaking debt-servicing within 7 calendar days from the end of the month in which the event occurs.
   
10. Reporting of untraceable borrowers: Where a borrower fails to file the prescribed returns for four consecutive quarters post-drawdown, and the designated AD bank records repeated unsuccessful contact attempts and non-operation from the registered office, the borrower may be classified as untraceable and reported to the RBI and the Directorate of Enforcement.
    
    The above is already effective from 16 February 2026.

Disclaimer

This article is meant for general informational purposes only and is not to be treated as legal advice or opinion.