1. Context and applicability

The Reserve Bank of India has notified the Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026, which substantially revises the regulatory framework governing External Commercial Borrowings in India. The Amendment modifies the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018. The amended framework takes effect from the date of the amendment notification i.e. 9^th February 2026.

A transition principle is relevant for borrowers with existing ECBs. ECBs where the Loan Registration Number (LRN) was obtained prior to the effective date continue to be governed by the earlier regime for substantive conditions, while revised reporting and compliance processes apply going forward. This distinction matters for borrowers planning drawdowns, refinancing, conversions, or transaction linked restructurings under existing LRNs.

2. Expanded eligibility of borrowers

A key amendment is the express recognition of Limited Liability Partnerships as eligible borrowers under the ECB route. This widens access to offshore debt for professional services structures, investment holding vehicles, and operating businesses organised as LLPs, subject to their governing law and internal authorisations.

The amendments also clarify the treatment of special situations. Entities undergoing resolution or restructuring may be able to access ECB if the governing legal framework and the approved plan permits such borrowing. Separately, where a borrower is subject to investigation, adjudication, or appeal by enforcement agencies, the framework contemplates ECB raising without prejudice to the outcome, coupled with disclosure and reporting expectations in the prescribed forms.

3. Recognised lenders: clarified universe

The revised framework reiterates that ECB can be raised from persons resident outside India and other permitted lender categories. It also recognises certain institutional channels, including overseas branches of lenders regulated by the Reserve Bank of India and financing channels operating through an International Financial Services Centre, subject to the conditions prescribed for recognised lenders.

4. Higher ECB headroom and exemptions The borrowing headroom has been liberalised. Instead of the earlier uniform cap, the revised limit is the higher of:

1. USD 1 billion outstanding ECB, or
2. 300 percent of the borrower’s standalone net worth.

In addition, eligible borrowers regulated by financial sector regulators are carved out from ECB limits, meaning the numerical ceiling does not apply to such regulated entities, subject to their sectoral regulatory framework and the ECB conditions

5. Minimum Average Maturity Period: standardisation and option discipline

The framework now standardises the Minimum Average Maturity Period at 3 years, replacing the earlier maturity matrix that varied depending on end use.

A specific relaxation is provided for manufacturing entities. Such entities may raise ECB with MAMP between 1 and 3 years, subject to an aggregate outstanding cap of USD 150 million for these shorter tenor borrowings.

The amendments also tighten discipline around embedded options. Call and put options, if any, cannot be exercised prior to completion of the applicable MAMP.

6. Prepayment and early closure: expanded automatic route scenarios

The revised framework permits prepayment before completion of MAMP under the automatic route in specified circumstances. These scenarios include, among others:

1. Conversion of ECB into a non debt instrument in accordance with the foreign investment regime
2. Repayment of ECB using proceeds of foreign investment
3. Waiver by the lender
4. Specified restructuring and closure events involving the borrower or lender, including merger, demerger, acquisition of control, amalgamation, resolution, or liquidation, as applicable

7. Pricing framework: shift to market linked pricing and arm’s length discipline

A significant change is the removal of the earlier “all in cost ceiling” construct. Pricing is now to be guided by prevailing market conditions. In related party ECB, the framework emphasises an arm’s length basis.

Where ECB is raised with maturity below three years under permitted relaxations, cost discipline may align with the pricing framework applicable to trade credits.

8. End use liberalisation and clarified negative list

The revised regime liberalises certain end uses while retaining a negative list approach, supported by specific exceptions.

Key liberalisations include:

1. Construction development: permitted subject to conditions, including sale of plots only after completion of trunk infrastructure
2. Development of industrial parks: permitted subject to minimum unit and allocable area thresholds
3. Real estate-related activities: the restriction on real estate business is relaxed for specified cases, including infrastructure activities, specified own use acquisitions, and real estate broking services
4. Strategic corporate actions: ECB proceeds may be used for transactions in securities as part of strategic corporate actions such as merger, demerger, amalgamation, arrangement, or acquisition of control, provided the transaction complies with the applicable legal and regulatory framework including corporate law and securities law requirements

At the same time, restrictions continue for certain purposes, with exceptions carved out. Borrowers must test end use against the negative list and ensure that any exception relied upon is met in substance and documentation.

9. Receipt, drawdown, and parking of ECB proceeds

Operational rules for proceeds management are tightened.

1. Drawdown is permitted only after obtaining the LRN.
2. For INR expenditure, ECB proceeds must be credited to an INR account with the designated Authorised Dealer bank within the prescribed timeline. Pending utilisation, funds may be parked in an unencumbered fixed deposit with the designated bank for up to one year.
3. For foreign currency expenditure, proceeds may be retained in permitted foreign currency accounts in India or abroad, and pending utilisation may be invested outside India in an unencumbered fixed deposit or unencumbered debt instruments with original maturity up to one year.

10. Reporting overhaul and enforcement risk: event-based filings and untraceable borrower flagging

A major compliance change is the move of the periodic ECB utilisation and debt servicing return to an event based filing system. Filing is required upon:

1. Utilisation of ECB proceeds, or
2. Undertaking debt servicing

The filing timeline is linked to the month of the event, within the prescribed number of days from month end.

The framework also introduces a stronger enforcement posture for chronic non reporting. Where returns are not filed for four consecutive quarters after drawdown and the Authorised Dealer bank documents inability to contact the borrower and non operation at the registered office, the borrower may be flagged as untraceable and the matter may be escalated to the regulator and enforcement authorities.

11. Exclusions and boundary conditions

The revised ECB framework does not cover certain instruments and capital inflow channels that are governed under separate regulations, such as specific non resident debt investments, convertible notes, export advances, and trade credit with original maturity up to three years, subject to compliance with their respective regimes.

Closing note

The 2026 amendments mark a clear shift towards liberalised access, simplified maturity norms, and practical flexibility in corporate action financing, accompanied by stricter compliance expectations and enhanced scrutiny on reporting discipline. Borrowers that redesign documentation, treasury SOPs, and event based reporting controls will be best placed to use ECB as a reliable and compliant funding channel.