Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026
Notified: 9 Feb 2026 | Published: 16 Feb 2026
Key shift: Liberalised limits + costs, but tighter end-uses & reporting
Here are some key highlights from the amended ECB framework:
- Existing ECBs Protected:
-ECBs with LRN pre-notification: Follow old rules
-Exception: New reporting standards apply
- Stricter end-use restrictions:
– Prohibited uses now expressly include chit funds, Nidhi companies, real estate business, and farmhouse construction (with limited, specified exceptions for real estate).
– General agriculture/animal husbandry, non-specified plantations, TDR trading, and security market transactions are barred, except for defined strategic corporate actions such as mergers and takeovers.
– ECBs cannot be used to repay INR loans that themselves had restricted end-uses or are classified as NPAs; on-lending for prohibited purposes is also not permitted.
- Enhanced borrowing limits:
– Eligible borrowers can now raise ECB up to the higher of:
(a) USD 1 billion outstanding ECB, or
(b) Total external + domestic borrowings up to 300% of net worth (as per the latest audited standalone balance sheet).
– Non-fund-based facilities and mandatorily convertible equity instruments are excluded from the borrowing computation, while the proposed ECB (other than pure refinancing) is counted for limit checks.
- Minimum average maturity (MAMP):
– Standard MAMP of 3 years for ECBs.
– Manufacturers are allowed shorter tenors of 1–3 years, subject to a cap of USD 150 million outstanding under such shorter-maturity ECBs.
- Cost of borrowing:
– For ECBs with average maturity of less than 3 years, the all-in-cost must comply with the Trade Credit cost ceilings.
– For fixed-rate ECBs, the fixed rate (plus spread) must not exceed the equivalent floating rate ceiling derived from the corresponding swap.
- Tightened reporting framework:
– Form ECB 1: To be filed to obtain the LRN for each ECB.
– Revised Form ECB 1: To report any change in ECB parameters or any other detail earlier reported in Form ECB 1, within 7 calendar days from the month-end in which the change occurs.
– Form ECB 2: To report receipt of ECB proceeds and all debt servicing, within 7 calendar days from the month-end of the relevant transaction; any event affecting the outstanding borrowing under an LRN must be captured here.
For corporates, this overhaul is both an opportunity and a compliance challenge: higher headroom and flexibility on structure and pricing, coupled with a far more prescriptive regime on end-use and reporting.