26 February 2026
RBI Notifies Amendments to the External Commercial Borrowing (ECB) Framework
 
The Reserve Bank of India (RBI) has issued the Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations2026, dated February 09, 2026, revising the External Commercial Borrowing (ECB) framework under the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018. Consequent changes have also been made to the prescribed reporting formats- Form ECB 1/Revised Form ECB 1 and Form ECB 2.

In the Statement on Developmental and Regulatory Policies dated October 01, 2025, the RBI proposed rationalizing the ECB framework. The amendments now notified implement this by linking borrowing limits to financial strength, requiring that borrowing costs be in line with prevailing market conditions, mandating arm's length pricing for related party ECB, simplifying end-use and maturity norms, expanding the eligible borrower and lender base, and streamlining reporting requirements.

  Applicability



The revised framework applies to ECBs for which the Loan Registration Number (LRN) is obtained on or after 9 February 2026. ECBs with an LRN obtained prior to the coming into force of these regulations shall continue to comply with the then applicable regulations; however, reporting in respect of such ECBs shall be undertaken in accordance with the amended regulations.

  Key Structural Shifts


  • Borrowing Limits
    Borrowing ceilings existed under the earlier ECB framework and were largely structured through route-based caps and sectoral thresholds. Under the automatic route, the general limit was USD 750 Million (or equivalent) per financial year, subject to specific sectoral variations and end-use conditions.

    The revised framework replaces this structure with a cap linked to balance sheet . ECB is now permitted up to the higher of:
    • USD 1 Billion outstanding; or
    • 300% of net worth as per the last audited standalone financial statements.
    The proposed ECB (other than refinancing) must be included while testing compliance with this limit.

    The revised framework replaces fixed annual ceilings with a limit linked to the borrower's financial position.

  • Newly Codified or Substantively Introduced Elements

    Area Position after amendment
    Borrowers under Investigation Permitted to raise ECB despite pending investigation/adjudication/appeal, subject to disclosure in Form ECB 1.
    Untraceable Borrower Concept Sustained non-reporting and non-responsiveness can trigger classification as "untraceable"; AD bank required to inform RBI and enforcement authorities.
    Arm's Length Principle Explicit regulatory requirement for related party ECB to be at arm's length.
    Manufacturing Window ECB with 1-3 year maturity permitted up to USD 150 Million outstanding.
    Security & Enforcement Codified provisions allowing charge over tangible and intangible assets (including IPR) with structured enforcement mechanics.
    Embedded Reporting Timelines Seven-day reporting requirements and late submission fee framework incorporated directly into the Regulations.
     
  • Key Modifications

    Area Revised Approach
    Cost of Borrowing Replaces the earlier benchmark-linked all-in-cost ceiling with a principle-based requirement that cost be in line with prevailing market conditions. For ECB with maturity below three years, cost is aligned to the Trade Credit ceiling.
    Eligible Borrowers Any non-individual resident entity incorporated/established under law, subject to the enabling Act, including limited liability partnerships (LLPs).
    Currency Flexibility Explicit flexibility for foreign currency/INR conversion subject to exchange rate discipline.
    Minimum Average Maturity Period (MAMP) Retains a three-year MAMP as the general norm, while reducing earlier sector-based maturity variations and providing clearly defined exceptions, including a limited short-tenor window for the manufacturing sector and specified cases such as refinancing and conversion.
    Conversion to Non-Debt Instruments Aligns ECB conversion with the Non-Debt Instrument Rules, permits conversion of matured but unpaid ECB, and requires lender consent, no additional conversion cost, and compliance with pricing and prudential norms.
    Refinancing Weighted outstanding maturity must continue to meet original MAMP discipline.
    •  
  • Provisions Not Carried Forward in the Same Form

    Earlier Provisions Remarks
    Detailed sector-specific parameter matrices Replaced with broader principle-based drafting.
    References to earlier restructuring mechanisms Not carried forward; framework aligned with current prudential norms
    Legacy carve-outs and scheme-specific references Not carried forward.
    •  
Our Comments

The revised ECB framework incorporates material changes across borrowing limits, pricing, maturity, security, and reporting. The net worth-linked cap, a market-aligned cost principle, and an explicit arm's length requirement increases the importance of accurate financial reporting and robust documentation. From an audit standpoint, focus areas will include computation of borrowing headroom, testing maturity and refinancing compliance, reviewing of related party pricing support, verifying investigation disclosures, conducting security documentation checks, and strict monitoring of reporting timelines. Entities with existing or proposed ECB exposure should review treasury policies and internal controls to ensure alignment with the revised framework.
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