RBI’s Revised ECB Framework: What Has Changed for Indian Businesses? — Part 1

External Commercial Borrowings, commonly known as ECBs, have always been an important route for Indian businesses to access foreign debt capital. For companies looking at expansion, manufacturing capacity, offshore acquisitions, infrastructure development, refinancing or group-level funding, ECBs can provide access to a wider lender base and, in some cases, more competitive financing.

However, ECBs are not ordinary loans. They are regulated foreign borrowings governed by the Foreign Exchange Management Act, 1999, the regulations issued thereunder, and directions issued by the Reserve Bank of India.

This means that an Indian business cannot simply borrow from an overseas lender merely because the commercial terms are attractive. The borrower must be eligible. The lender must be recognised. The amount must be within the permitted limit. The maturity must comply with the prescribed framework. The end-use must be permitted. The reporting must be accurate.

In February 2026, the RBI revised the ECB framework by amending the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 and the related directions. The revised framework represents one of the more important liberalisations of India’s foreign borrowing regime in recent years.

This three -part series explains the revised ECB framework and its practical implications for Indian businesses.

In Part 1, we examine the broad changes relating to borrower eligibility, recognised lenders, borrowing limits and maturity. In Part 2, we will examine the more critical commercial questions: what ECB proceeds can be used for, how end-use restrictions have changed, what compliance risks remain, and what CFOs should evaluate before signing an ECB transaction.

1. What is an ECB?

An External Commercial Borrowing is a commercial borrowing raised by an eligible Indian borrower from a recognised non-resident lender.

ECBs may be raised in foreign currency or, in certain cases, in Indian rupees, subject to the applicable regulatory framework.

Common forms of ECB include:

• foreign currency loans;

• buyers’ credit;

• suppliers’ credit;

• foreign currency convertible bonds;

• foreign currency exchangeable bonds;

• financial leases;

• other debt instruments permitted under the ECB framework.

In simple terms, ECB is a regulated route through which Indian businesses can access foreign debt capital.

The regulatory focus is not only on the borrowing itself, but also on the identity of the borrower, the identity of the lender, the amount borrowed, the cost of borrowing, the maturity period, the purpose for which the funds are used, and the manner in which the transaction is reported to the RBI through the authorised dealer bank.

2. Why has the ECB framework been revised?

The revised ECB framework appears to be driven by three broad policy objectives.

First, simplification

The earlier ECB regime had several layers of conditions. Borrowers and authorised dealer banks had to examine eligible borrower categories, recognised lender conditions, borrowing limits, sector-specific rules, maturity requirements, end-use restrictions, all-in-cost ceilings and reporting requirements.

While this detailed approach gave regulatory control, it also created practical difficulties for legitimate businesses. ECB structuring often became compliance-heavy, especially in transactions involving group entities, acquisitions, restructuring or non-traditional business vehicles.

The revised framework seeks to simplify this architecture.

Second, wider access to foreign capital

Indian businesses are increasingly operating in a more capital-intensive environment. Infrastructure, manufacturing, renewable energy, technology, logistics, warehousing, acquisitions and global expansion require deeper pools of capital.

Domestic bank funding alone may not always be sufficient or commercially optimal. ECBs give Indian businesses access to a broader international lender base.

The revised framework therefore appears to support India Inc.’s need for larger and more flexible sources of debt capital.

Third, regulatory oversight without excessive friction

The RBI has not deregulated ECBs. It has liberalised the framework while retaining oversight.

This is important. ECBs can be useful for growth, but they also carry currency risk and external debt risk. A borrower with no foreign currency earnings may find an ECB attractive at the time of borrowing, but vulnerable if the rupee depreciates.

Therefore, the revised framework should be understood as calibrated liberalisation, not unrestricted foreign borrowing.

3. Expanded eligibility of borrowers

One of the most important changes is the widening of the eligible borrower base.

Under the revised framework, any person resident in India, other than an individual, which is incorporated, established or registered under a Central or State legislation and is permitted to borrow under the relevant law, may be eligible to raise ECB.

This is a significant change.

Earlier, the eligible borrower framework was more category-driven. This sometimes created interpretational issues for business forms that did not fit neatly into the traditional company-centric approach. An example would be LLP. LLPs were earlier not permitted to borrow but now they can.

The revised framework is more aligned with India’s modern business environment, where commercial activity may be conducted through:

• companies;

• limited liability partnerships;

• infrastructure vehicles;

• regulated entities;

• holding entities;

• sector-specific vehicles;

• restructuring vehicles;

• other legally recognised non-individual entities.

Practical implication

This change may allow a wider range of Indian entities, including LLPs, to evaluate ECB as a funding route, subject to their governing law and sectoral regulations.

However, eligibility under the ECB framework is only one part of the analysis. The borrower must also check whether it is permitted to borrow under its own constitutional documents, governing law, sectoral regulations and contractual arrangements.

For example, a company must examine its articles of association, board approvals, borrowing powers and any lender restrictions. An LLP must examine its LLP agreement and the applicable provisions governing its borrowing powers.

4. Wider recognised lender base

The revised framework also liberalises the recognised lender concept.

This is commercially important because international lending is no longer limited to traditional foreign banks. Businesses may raise funds from overseas group entities, financial institutions, credit funds, development finance institutions, strategic investors, private debt providers and other non-resident lenders.

A wider recognised lender base can make ECBs more useful in modern corporate finance transactions.

Practical implication

Indian borrowers may now be able to explore a broader universe of overseas lenders.

However, this flexibility must be handled carefully. The borrower must still examine:

• whether the lender qualifies under the ECB framework;

• whether the lender is a group entity or related party;

• whether transfer pricing rules apply;

• whether withholding tax applies on interest payments;

• whether the lender jurisdiction creates tax or beneficial ownership concerns;

• whether the borrowing terms are at arm’s length;

• whether any guarantee, security or pledge is involved.

This is particularly important in group funding structures. A foreign parent, overseas subsidiary, offshore group treasury company or promoter-linked foreign entity may be commercially convenient as a lender, but such transactions need careful FEMA, tax and transfer pricing review.

Conclusion

The revised ECB framework marks an important shift in India’s approach to foreign debt capital. By expanding the eligible borrower base and widening the recognised lender framework, the RBI has made the ECB route more accessible to a broader range of Indian businesses.

This is particularly relevant in today’s business environment, where Indian entities are no longer confined to traditional company structures and where funding requirements are becoming more complex, strategic and cross-border in nature. LLPs, group entities, infrastructure vehicles, restructuring platforms and other non-individual business forms may now have greater room to examine ECB as a possible funding route, subject to the applicable legal and regulatory conditions.

However, eligibility is only the starting point. Merely because an entity can borrow from an overseas lender does not mean that the borrowing is automatically viable or compliant. The borrower must still examine the amount that can be raised, the applicable maturity conditions, the cost of borrowing, the currency exposure and the purpose for which the funds can be used.

The revised framework has therefore widened the entry gate for ECBs, but it has not removed the need for careful structuring.

In Part 2 of this series, we will examine the next important question: how much can Indian businesses actually borrow under the revised ECB framework, for what period, and at what cost?