RBI's Revised ECB Framework: Early Insights Ahead of Detailed Directions

Expanded Participation:

One of the most significant shifts in the Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026 is the expansion of Eligible Borrowers. Previously, the regime was largely restricted to entities eligible for Foreign Direct Investment (FDI).

LLPs allowed to borrow-

Under the new rules, Limited Liability Partnerships (LLPs) and companies (even in sectors where FDI is not permitted) can now raise ECBs, provided they are permitted to borrow under applicable law.

As per the revised definition of “Indian Entity” Limited Liability Partnership (LLP) are expressly included within the scope of eligible borrowers which was earlier not permitted.

Even a non shareholder Individual permitted to lend -

Also, now any individual can act as a lender, even if they are not a foreign equity holder of the Indian borrower. Moreover, the regime now recognizes any individual outside India and any entity registered in GIFT City as eligible lenders.

Increased Limits and Flexible Maturity:

Borrowers can now have more capital access, with borrowing limits now set at the higher of USD 1 billion or 300% of the entity's net worth. The manufacturing sector can now access ECBs of up to USD 150 million with a Minimum Average Maturity Period (MAMP) of just one to three years, while the standard MAMP is set at three years irrespective of the end-use.

Borrowing costs rationalized -

There have been significant liberalizations relating to borrowing costs. The earlier rigid interest rate ceilings have been removed, allowing ECB pricing to be aligned with prevailing market conditions and enabling a wider range of global lenders, including credit funds, to participate.

Liberalized End-Uses:

The scope of permitted end-uses has also been substantially expanded. ECB proceeds may now be utilized for strategic M&A transactions, including acquisition of control in listed or unlisted companies and entities undergoing insolvency. In addition, borrowers can then deploy the funds raised through ECB to purchase, sell or lease land or immoveable property for setting up industrial parks and SEZs, development of new industrial or expansion of existing ones or even for purchasing property for their own use.
 

ECB 2 Return:

The ECB-2 return is required to be submitted only in months where there is a drawdown or any debt servicing(i.e. drawdown, repayment, or interest payment) during the relevant month. The return must be filed with the AD Bank within 7 calendar days from the end of that month. Accordingly, in the absence of any such transaction, the earlier regime required NIL returns to be filed. The same is now done away with. Reporting of ECB 2 Return is applicable for both existing and new LRNs.

It is important to note that a relaxation has been provided for obtaining a new LRN. However, entities that had already availed LRN prior to 16th Feb 2026, need to comply with earlier ECB regulation on Maintaining Minimum Average Maturity period and other conditions.

In this regard the Master Directions are yet to be issued by the Reserve Bank of India (RBI).

Conclusion:

The 2026 ECB amendments mark a significant step towards liberalizing India’s borrowing framework, making it more accessible, flexible, and aligned with global practices. With the inclusion of LLPs, expanded lender base, higher borrowing limits, and relaxed end-use restrictions, businesses now have greater opportunities to raise and utilize foreign capital efficiently.

At KDP Accountants, we help businesses navigate ECB regulations seamlessly and ensure end-to-end compliance with RBI and FEMA requirements. For professional guidance, connect with us at enquire@kdpaccountants.com

Gayatri Konar
Author

Gayatri is a CA Final student currently pursuing her articleship, who is particularly interested in cross-border financial transactions and FEMA regulations. She has been exposed to issues concerning foreign investments, Overseas Direct Investment (ODI), External Commercial Borrowings (ECB), and regulatory reporting under the Reserve Bank of India (RBI) framework through her hands-on experience during her articleship.

In order to effectively contribute to the ever-changing landscape of cross-border investments, she is eager to gain deeper expertise in FEMA compliance, foreign investment regulations, and international financial advisory.