Draft External Commercial Borrowings Framework 2025: Key Changes by RBI

 The RBI has undertaken a comprehensive review of the ECB regulations with the objective of rationalising and simplifying the regulatory regime governing borrowings from outside India. The RBI had recently, released the draft amendments to the ECB regulations which represents a significant move towards modernising and streamlining India’s ECB regime.

The key changes proposed under the draft framework have been tabulated below:

Particulars	Existing Regulation	Proposed Regulation
Borrowing limit	USD 750 million per financial year.	Higher of the following: Outstanding ECB up to USD 1 billion; or Total outstanding borrowing (external and domestic) up to 300 per cent of net worth as per the last audited balance sheet. Above limit not applicable on eligible borrowers regulated by financial sector regulators (e.g., RBI, SEBI, IRDA, etc.)
Eligible Borrower	Entities eligible to receive FDI.	· Any person resident in India (excluding individuals) incorporated, established or registered under a Central Act or State Act. · Entities under restructuring or insolvency if permitted under the restructuring or resolution plan. · Entities under investigation or appeal for contravention of FEMA may also borrow, subject to disclosure of details to their AD Category I Bank.
Recognised lender	Must be a resident of FATF or IOSCO compliant country.	Any non-resident person and branches (overseas or in IFSC) of RBI-regulated lending entities.
Minimum Average Maturity Period (MAMP)	Different MAMP prescribed depending on the end use of funds & type of lender.	· Uniform MAMP of three years. · Manufacturing entities may raise ECBs with maturity between one and three years, subject to a cap of outstanding ECBs of USD 50 million. · Call and put options cannot be exercised before completion of MAMP. · MAMP is waived in cases of ECB conversion to non-debt instruments, repayment using non-debt instrument proceeds, debt waiver, or closure, merger, acquisition, or liquidation of the borrower or lender.
All in Cost (interest, fees & other charges)	Benchmark rate plus 450 basis points	Prescribed limits removed, all in cost to now be in line with prevailing market conditions. ECBs with maturity period of less than three years to be in line with cost ceiling prescribed for Trade Credit. ECBs from related party or group entities shall be carried out on an arm’s length basis.
Security	Borrowers can secure ECBs by providing corporate and / or personal guarantee.	Borrowers can provide security by creating charger on assets in addition to providing guarantees, subject to loan agreement terms, consent from existing domestic lenders, and alignment with the ECB’s tenure.
End uses	All purposes except for restricted activities such as- · Chit funds, · Nidhi companies, · Investment in capital markets, · Agriculture or plantation activities, · Trading in Transferable Development Rights (TDR), and · On-lending transactions except in case of NBFCs.	· ECB proceeds can now also be deployed for mergers, acquisitions, or restructurings under the Companies Act, SEBI SAST Regulations, and the IBC; and · They can also be utilised for on-lending by RBI-regulated lending entities, and Indian companies lending to their group entities. · Additionally, ECB proceeds can be invested in primary market instruments issued by non-financial entities for aforesaid on-lending activities.
Currency	The currency of the borrowing may be changed from one foreign currency to another or Indian Rupees. However, change from Indian Rupees to Foreign Currency is not permitted.	Change of borrowing currency from Indian Rupees to Foreign Currency is permitted.

The draft framework marks a transformative shift in India’s ECB regime, broadening access to foreign capital and expanding eligible end-uses to include mergers, acquisitions, and on-lending activities. It signals a significant liberalisation, enhancing flexibility and enabling Indian entities to tap a wide range of funding options within a transparent regulatory environment.