The amended regulations rationalise the ECB framework by expanding the eligible borrower and recognised lender base, revising borrowing limits and average maturity period norms, and removing restrictions on the cost of borrowing for ECBs.
The changes also include a review of end-use restrictions and simplification of reporting requirements. The regulations were issued after examining and incorporating feedback received from stakeholders on the draft regulations published on the RBI’s website.
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In a feedback statement, the central bank detailed the accepted suggestions on the draft amendment to the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018, which was released on October 03, 2025, seeking comments on proposed changes to the ECB framework.
The RBI has removed the requirement of maintaining a current account to become a designated Authorised Dealer Bank. It has clarified that funds raised through the ECB can be used to purchase land and immovable property, subject to specified restrictions and conditions, including cases where such restrictions do not apply.
The central bank has specified that the acquisition of control is a permitted end-use of funds raised through the ECB.
RBI-regulated entities are allowed to use ECB funds for on-lending to individuals. While restrictions apply to the purpose of loans extended using ECB funds, there is no restriction on such on-lending to individuals.
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Investments by Foreign Venture Capital Investors in debt securities have been addressed, providing clarity on their treatment within the ECB framework. The proposal to increase the stock limit for short-term borrowing by manufacturing companies beyond the proposed $50 million limit has also been accepted.
Clarifications have been issued on the treatment of instruments such as compulsorily convertible preference shares, compulsorily convertible debentures and optionally convertible debentures for calculating outstanding borrowing. The treatment of non-fund-based credit and refinancing by the ECB for the same purpose has also been detailed.
The manner of computing Minimum Average Maturity has been specified. The requirement for assessment by the designated Authorised Dealer bank to ensure that borrowing and other costs align with prevailing market conditions has been removed.
Following the removal of the all-in-cost cap, the requirement that the cost of borrowing or credit spread be lower in case of refinancing ECB has also been removed. The standard operating procedure for handling untraceable entities, earlier contained in the master direction, has now been incorporated into the regulations.
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(Edited by : Jomy Jos Pullokaran)
