RBI Revises External Commercial Borrowing Rules, Removes Cost Cap

The Reserve Bank of India (RBI) has notified the Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026, making changes to the External Commercial Borrowing (ECB) framework. As per the news reports, the revised rules remove the all-in-cost ceiling on borrowings and ease certain maturity conditions. 

With the ceiling removed, Authorised Dealer (AD) banks will no longer be required to check whether borrowing costs are in line with market rates. Provisions related to refinancing have also been relaxed following this change. 

Borrower and Lender Base 

The amended regulations expand the set of eligible borrowers and recognised lenders. They also revise borrowing limits and clarify how minimum average maturity should be calculated. 

The RBI said the changes were finalised after reviewing feedback on draft norms released on October 3, 2025. The regulator has also published its responses to major stakeholder comments. 

End-Use And On-Lending Rules 

The central bank has clarified that ECB proceeds may be used to purchase land and immovable property, subject to specified conditions. It has also stated that acquisition of control is a permitted end-use. 

RBI-regulated entities will be allowed to on-lend ECB funds to individuals. However, such funds cannot be used for real estate business as defined under the regulations. 

Operational Changes and Limits 

The requirement to maintain a current account to qualify as a designated AD bank has been removed. The RBI has also clarified the treatment of foreign venture capital investor debt investments and various convertible instruments. 

It accepted suggestions to allow manufacturing companies to access short-term borrowings up to $50 million. At the same time, requests to extend the revised rules to existing ECBs or allow on lending to real estate businesses were not accepted. 

Read More: RBI Reinstates Default Loss Guarantees Framework for NBFCs! 

Conclusion 

The revised regulations will apply to new borrowings. Existing ECBs will continue under the earlier framework, though reporting timelines will follow the updated rules. 

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