RBI Allows Companies to Raise Up to $1 Bn from Abroad Under Revised ECB Rules

The Reserve Bank of India (RBI) has introduced sweeping changes to the way Indian companies can raise money from overseas lenders. Through the Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026, the central bank has relaxed several norms governing External Commercial Borrowings (ECBs).

"The amended regulations have rationalised the ECB framework by expansion of eligible borrower and recognised lender base, rationalisation of borrowing limits and restrictions on average maturity period. It has also removed restrictions on the cost of borrowing for ECBs, review of end-use restrictions and simplification of reporting requirements," the RBI said.

Point to note: ECBs are commercial loans raised by eligible resident entities from recognised non-resident entities, regulated by the RBI under the Foreign Exchange Management Act (FEMA).

One of the biggest changes under the new guidelines is the increase in borrowing limits. Companies can now raise ECBs of up to $1 billion or 300% of their net worth, whichever is higher. Earlier, the annual cap stood at $750 million.

This move provides greater flexibility to companies seeking overseas funding. However, the enhanced borrowing limit will not apply to entities regulated by financial sector regulators, such as Non-Banking Financial Companies (NBFCs).

The RBI has also revised the minimum average maturity period, that is, the minimum time over which the loan must be repaid.

Under the new guidelines, eligible borrowers raise ECBs with a minimum average maturity period of three years. Manufacturing sector companies have been given some flexibility. They are allowed to raise ECBs with an average maturity of one to three years, provided their total outstanding amount does not exceed $150 million.

The apex bank also removed restrictions on the cost of borrowing, stating that the cost of ECBs should be market determined. In the case of fixed-rate loans, the floating rate plus the corresponding swap spread should not exceed the prescribed ceiling.

It has further expanded the eligible borrower and lender base for ECB transactions. The bank has proposed allowing any entity, including those under restructuring or investigation, to raise funds through ECBs.

Under the revised guidelines, proceeds from ECBs can be utilised in deposit or other debt instruments with maturity of up to one year. At the same time, the RBI has retained restrictions on certain end uses. Funds raised through the overseas route cannot be used for chit funds, Nidhi companies, real estate business, construction of farmhouses, or investment in the stock market, among other prohibited activities.