ecb norms

How will RBI’s ECB Reforms Benefit Indian Companies?

On February 16, 2026, the Reserve Bank of India (RBI) has released new final guidelines on External Commercial Borrowings (ECB) framework, outlined under the Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026.  

The reform aims to promote overseas fundraising for Indian companies. Now, they can raise more money from abroad, with the potential of double annual inflows of $100 billion by 2027, from $61.18 billion in FY25. 

An ECB is a loan taken from a foreign bank or financial institution. The withdrawal limit for this has also been increased to $1 Billion or 300% of the company’s net worth. The decision has created a big opportunity for Indian businesses for those looking to expand rapidly. 

In this article, you will understand the ECB, recent changes in the RBI, the benefits and conditions of the new rules, and their importance for businesses.  

Understanding RBI’s External Commercial Borrowings 

External Commercial Borrowings, or ECB, is a commercial loan taken from abroad. It is usually taken from foreign banks, financial institutions, or international investors. Indian companies often go to foreign markets when they need low interest rates or large amounts of money. 

ECB can often be cheaper than domestic bank loans. However, there is a currency risk because the loan is taken in a foreign currency. If the rupee depreciates, the repayment cost may increase. 

In India, the ECB is fully regulated by the Reserve Bank of India. The RBI sets out the rules, who can borrow, how much they can borrow, how long, and where that money can be used. If you are looking to raise foreign currency funds, you must opt for the best ECB Compliance advisory services.  

What has RBI Changed in the ECB Framework? 

RBI has made the ECB framework simpler and more flexible in the new guidelines. Some of the important changes are given below. 

Higher Borrowing Limit 

The biggest change is the increase in the per-borrower limit. Earlier, a maximum of $750 million could be withdrawn in a year. Now, companies can borrow up to $1 billion or 300% of their latest audited net worth.  

Certain non-fund-based facilities and mandatorily convertible equity instruments will be excluded from this limit. So, the actual borrowing capacity can be determined more clearly. 

Expansion of Eligible Borrowers and Lenders 

RBI has now allowed more types of companies to take ECB, even for those companies that are restructuring or under investigation, but under certain conditions. In addition, the list of foreign lenders has also been expanded. So, companies will be able to raise money from more options. 

Removal of Borrowing Cost Restrictions 

The ECB interest rate will be determined according to the market. RBI is not strictly limiting the interest rate as before. However, in the case of fixed-rate loans, a specific ceiling will have to be followed by combining the floating benchmark and the corresponding swap spread. 

Simplified Reporting Requirements 

The reporting process has also been simplified. So, the burden of paperwork and formalities will be reduced. This will save both time and cost of business. 

RBI’s ECB Revised Maturity Rules 

The new rules have also made some changes regarding the maturity or loan term of ECB. Below is a simple explanation: 

Minimum Average Maturity: 

The average minimum maturity for all ECBs will be 3 years.  

Manufacturing Sector Relaxation: 

Special relaxation has been made for the manufacturing sector. 

Short-Term Borrowing for Manufacturers: 

Manufacturing companies will be able to borrow a maximum of $150 million with a maturity of 1 to 3 years. 

Cost Alignment with Trade Credits: 

In the case of short-term ECBs, the interest structure will have to be aligned with the limits set for trade credit. 

These changes will help the manufacturing sector raise capital quickly while also maintaining financial stability in the long term. 

RBI’s ECB Funds Permitted and Restricted Uses 

RBI has clearly defined where the funds withdrawn from the ECB can and cannot be used. This ensures proper use of the funds. 

Permitted Uses of RBI’s ECB Funds 

You are allowed to use RBIs ECB funds for:  

• Rupee Expenditure: If the funds are spent in Indian Rupees, then the amount must be deposited in an INR account within one month. 

• Fixed Deposits: Unused funds can be kept as unencumbered fixed deposits for a maximum period of one year. 

• Foreign Currency Accounts: Money for expenditure in foreign currency can be kept in domestic or foreign currency accounts. 

• Short-term Debt Instruments: Investment can be made in short-term debt instruments maturing within one year. 

Restricted Uses of RBI’s ECB Funds 

You cannot use RBIs ECB funds for:  

• Chit funds 

• Nidhi companies 

• Real estate business 

• Farmhouse construction 

• Stock market investment 

• Agricultural and animal husbandry activities 

These restrictions help prevent excessive borrowing in risky sectors. 

Why did RBI Make this Change Now? 

The trend of taking the ECB in India has increased rapidly in the last few years. In FY25, Indian companies raised a record $61.18 billion, compared to $48 billion in the previous year. The RBI realized that the dependence on foreign capital is increasing, and the rules need to be made more realistic. 

There are several important reasons behind the RBI bringing this change: 

• The ECB inflow has increased significantly 

• Companies need large amounts of money 

• To create an opportunity to raise capital easily from the global market 

• To support economic growth 

• To improve the Ease of Doing Business 

This decision will make raising money easier and more competitive for businesses. 

Impact of RBIs ECB Reform on Indian Corporates and NBFCs 

The new RBIs ECB rules brought a big relief to Indian corporates and NBFCs. Now they will be able to raise funds from abroad with more flexibility than before. This will strengthen their financial planning. 

The possible impacts of this change are: 

• Greater Flexibility: There will be no more restrictions on raising large amounts of funds. 

• Cheaper Global Capital: International markets often have lower interest rates. This can reduce the cost of funds. 

• Improved Liquidity: Businesses can expand faster with more funding opportunities. 

• Manufacturing Boost: The manufacturing sector will get the benefit from short-term loans, which will help increase production. 

• Support for Infrastructure and Fintech: Large projects and technology-based companies will get the benefit from long-term financing. 

• Strategic Advantage: Indian companies will be able to make faster decisions when global capital markets change. 

This is a positive step for Indian businesses. 

What Businesses Should Consider Before Raising ECB?  

Taking ECB can be profitable at times. There are some important things to consider before deciding. Taking a loan in a foreign currency means taking some additional risks. So, it is not right to proceed without a plan. 

Below are some important things that businesses must consider before raising the ECB. Look for the pointers given below:  

Currency Risk: 

The loan is taken in a foreign currency. If the value of the currency decreases, then it may cost more money at the time of repayment. 

Hedging Costs: 

Hedging is required to reduce currency risk. This adds additional costs. 

Interest Rate Movements: 

If international interest rates increase, the cost of the loan may also increase. 

Compliance and Reporting: 

Regular reports must be submitted as per RBI rules. 

Long-term Repayment Planning: 

A clear plan should be made in advance for repayment of installments and interest. 

Impact on Balance Sheet: 

Excessive debt can affect the financial position of the company. 

If analyzed properly, the ECB can be a big opportunity for the business. 

Final Words 

RBI’s new ECB rules have created a big opportunity for Indian companies. They can now raise funds from abroad up to $1 billion or 300% of their net worth. Maturity rules have been simplified, the list of borrowers and lenders has increased, and the reporting process has also been simplified. These changes will further strengthen India’s corporate funding system. 

However, it is important to understand the risks, interest rates, and compliance issues well, before taking ECB. It can be a powerful tool for business expansion with the right planning.  

Enterslice offers complete support for your ECB structuring, compliance advisory, regulatory filings, and the entire overseas borrowing process. We can help you move your business forward safely and on the right track with experienced advice. 

FAQs on RBIs ECB Reforms Benefiting for Indian Companies