RBI Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026

The Reserve Bank of India (RBI) introduced amendments to the external commercial borrowing (ECB) framework, aiming to rationalize various aspects of the regime. These adjustments were made after considering stakeholder feedback on a draft framework released in October 2025.

Key Changes in the ECB Framework

• Expansion of Eligible Borrower and Recognised Lender Base: More entities can potentially participate in ECBs.
• Rationalization of Borrowing Limits and Restrictions:
  • Average maturity restrictions have been adjusted.
  • Restrictions on borrowing costs for ECBs have been removed.
• End-use Restrictions: ECB proceeds can be used for purchases of land and property, subject to restrictions. Acquisition of control is a permitted end-use.
• Simplified Reporting Requirements: New timelines for reporting have been established.

Additional Regulatory Clarifications

• Designated Authorised Dealer (AD) Bank Criteria: The requirement to maintain a "current account" has been removed.
• Treatment of Specific Financial Instruments: Clarifications on foreign venture capital investments, short-term borrowing limits for manufacturing, and conversion instruments.
• Borrowing Cost Provisions: Removal of designated AD banks' requirement to align borrowing costs with market conditions.

Non-Accepted Suggestions

• No specific list of eligible entities for ECBs was provided; eligibility follows principles set in the regulations.
• ECB funds cannot be on-lent for real estate business.
• No removal of arm's length compliance requirement.
• No separate guidelines for borrowings from FATF non-compliant jurisdictions.

Prospective Application

The amendments are prospective, meaning existing ECBs remain under previous norms, but with reporting adjusted to fit new timelines.

Rulebook 2.0 Highlights

• “Current account” criterion for AD bank qualification is removed.
• RBI-regulated entities can on-lend ECB funds to individuals, excluding real estate business.
• Existing ECBs remain under older norms, but reporting follows new timelines.