Change in offshore borrowing laws: Understanding India’s new External Commercial Borrowing Framework

On 16 February 2026 the Reserve Bank of India notified Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026 which amends the provisions of the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 (‘New Framework’), revamping the regulatory framework for external commercial borrowings (‘ECB’) in India. 

The New Framework also omits the provisions pertaining to ECBs contained in Master Direction – External Commercial Borrowings, Trade Credits and Structured Obligations dated 26 March 2019 and related provisions pertaining to borrowing in Indian Rupees (INR) by persons resident in India as set out in Master Direction – Borrowing and Lending transactions in Indian Rupee between Persons Resident in India and Non-Resident Indians/ Persons of Indian Origin. The New Framework provides that ECBs availed prior to the amendment will continue to be governed by the erstwhile regime, except for the reporting requirements.

The New Framework has broadened the pool of eligible borrowers as previously only entities that were eligible to receive foreign direct investment (‘FDI’) were permitted to raise ECBs. Further, Limited Liability Partnerships (LLPs) are now eligible to avail borrowings by way of ECBs. 

Under the New Framework, eligible borrowers can raise ECBs up to the higher of: (a) outstanding ECBs up to USD 1 billion; or (b) total outstanding borrowings (external and domestic) up to 300% of the borrower’s net worth (excluding non-fund based credit and convertible securities) based on the last audited standalone balance sheet. The limit on borrowings does not apply to entities regulated by financial sector regulators (SEBI, RBI, IRDAI and PFRDA), providing greater operational flexibility to regulated entities like Non- Banking Financial Companies (NBFCs). 

One of the salient modifications under the New Framework pertains to permissibility for use of ECBs proceeds for domestic acquisitions, subject to acquisition being of controlling stakes and for ‘strategic purposes’ and ‘creating long term value’. This provides a new channel of funding for stakeholders intending to undertake domestic or cross-border acquisition.  

The New Framework also permits use of ECBs for real estate business, that comprise of construction-development projects and industrial parks, subject to specific conditions pertaining to sale of plots and size/structure of industrial parks. These are significant changes that enable funding of developmental projects, albeit subject to certain conditions.

Further, the New Framework standardizes the minimum average maturity period (MAMP) for ECBs at three years, replacing the earlier multi-tiered structure that required longer MAMP for certain uses. Manufacturing sector borrowers may raise ECBs with a shorter MAMP of one to three years, provided such borrowing within the limits prescribed, i.e. USD 150 million. Importantly, the New Framework clarifies that MAMP requirements do not apply in cases such as conversion of ECBs to equity, refinancing, repayment through non‑debt instruments, lender waivers, or corporate actions like mergers and acquisitions. These relaxations ease early prepayment scenarios and enable quicker closure of facilities, offering borrowers greater flexibility.

Overall, the New Framework liberalises the ECB regime by simplifying eligibility norms, standardising MAMP, and easing end‑use restrictions. It marks a shift in the RBI’s approach towards a more market‑oriented regime that offers greater flexibility to stakeholders. Its true impact will depend on how actively market participants reacts the liberalised regulatory framework and how effectively the RBI addresses regulatory gaps and interpretational issues.

[The author is an Associate in Corporate and M&A Team at Lakshmikumaran & Sridharan Attorneys, Hyderabad]