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Oct 7, 2025

RBI’s Proposed Changes to the ECB Framework

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On 3rd October 2025, the Reserve Bank of India (RBI) released a Draft External Commercial Borrowing (ECB) Framework for public comments (due by 24th October 2025). The draft proposes to make the ECB regime more flexible, market-linked, and easier to comply with.

Key proposals include linking borrowing limits to a company’s financial strength, allowing market-determined interest rates, simplifying maturity provisions, and relaxing restrictions on fund usage. It also expands the list of eligible borrowers and lenders, introduces simpler reporting and compliance requirements, and provides clearer rules on refinancing and guarantees. Overall, the draft framework seeks to create a more liberal and risk-sensitive ECB ecosystem for Indian borrowers.

Comparative Snapshot — Key Changes Proposed vis-a-vis Existing Framework

Area

Existing Framework

Proposed Changes in Draft (2025)

Borrowing Limits

ECB up to USD 750 million per financial year.

Eligible borrower permitted to raise ECB up to the higher of:
(a) outstanding ECB ≤ USD 1 billion; or
(b) total outstanding borrowings ≤ 300 % of net worth (as per latest audited financials).

Interest/ All-in-Cost Caps

Benchmark rate + 500 bps spread.

Market-driven pricing — cost of borrowing to align with prevailing market conditions, subject to RBI-specified exceptions.

Minimum Average Maturity (MAMP)

3–10 years, depending on track/ category.

MAMP of 3 years
Exception- 1-3 years permitted for the manufacturing sector.

End-Use Restrictions

Negative list includes:

  1. chit funds/Nidhi companies
  2. Real estate activity or construction of farmhouses
  3. agricultural or plantation activities
  4. Investment in capital market including margin trading and derivatives
  5. equity investment
  6. trading in TDRs
  7. working capital/general corporate purposes (with exceptions)
  8. repayment of rupee loans
  9. on-lending for prohibited uses.

End use restrictions-

  1. chit funds/Nidhi companies
  2. agricultural or plantation activities (except FDI-permitted)
  3. real estate/farmhouse construction

Exceptions-
– as permitted for FDI
– purchase/long-term leasing of industrial land as part of new project or expansion project on existing projects

  1. trading in TDRs
  2. on-lending, except by

– RBI-regulated entities or
– Company or body corporate to its group entities

  1. Transactions in listed/ unlisted securities-

– Investment in terms of ODI
– Restructuring as per the Scheme under the Companies Act, SBI Law, and IBC.

Eligible Borrowers/ Lenders

Entities eligible for FDI + Port Trusts, SEZ units, SIDBI, EXIM Bank.

Any person resident in India (other than an individual) incorporated, established or registered under Indian law.

Further, the draft regulations also propose to bring more clarity to the provisions for-

  1. Conversion of ECB into Equity shares
  2. Drawdown of ECB
  3. Gives defined reporting compliances
  4. Refinancing of ECB
  5. Issue of Guarantee

The draft marks a decisive move toward greater autonomy and risk alignment in external borrowings. While it promises enhanced access and flexibility for Indian corporates, it also places a premium on strong discipline for internal risk management and compliances. Stakeholders should track the final regulations to be published to evaluate exposure limits, update their borrowing policies, and adapt funding structures accordingly.

Link to the draft regulations-
https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=4736

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