·         A person resident in India (other than an individual) incorporated, established or registered under a Central Act or State Act may raise ECB, subject to the condition that it is permitted to borrow in terms of the applicable laws.

·         An eligible borrower that is under a restructuring scheme or corporate insolvency resolution process may raise ECB only if specifically permitted under the restructuring or resolution plan.

·         The requirement to be FDI eligible has been removed.

·         RBI in its responses to comments on the draft regulations has stated that clarification on specific borrower categories including trusts has not been accepted.

·         In light of the above, the position of REITs and InVITS as borrowers under the ECB route will need to be further considered

·         Resident of FATF or IOSCO compliant country as defined in the ECB policy, including on transfer of ECBs.

·         Multilateral and Regional Financial Institutions where India is a member country.

·          Foreign branches / subsidiaries of Indian banks are recognised lenders only for ECBs raised in foreign exchange.

·         The requirement for the lender to be from a FATF or IOSCO compliant country has been done away with, which will allow for greater flexibility including where the lending vehicle is to be structured as an SPV. There is no longer any restriction on foreign branches and subsidiaries of Indian banks in lending INR ECBs.

·         Standardised minimum average maturity period of three years with one exception for an eligible borrower engaged in manufacturing sector which may raise ECB with average maturity period between one year and three years, subject to the condition that outstanding amount of such ECBs shall not exceed USD 150 million.

·         Cases where early repayment (prior to the MAMP) is permitted:

o     Conversion of ECB (including FCCB and FCEB) to equity.

o     Repayment of ECB using the proceeds from issuance of foreign equity.

o     Refinance of the ECB as per the 2026 Regulations.

o     Waiver of debt by the lender.

o     Closure, merger, demerger, arrangement, acquisition of control, amalgamation, resolution or liquidation by the lender or the borrower.

·         A standard minimum average maturity of 3 years instead of different maturity requirements linked to different end-uses provides a simpler and more market-aligned framework.

·         The carve outs provided for repayment from foreign equity and on resolution,  liquidation or acquisition of control are helpful, as these events are usually early prepayment events from a credit perspective.

·         Notably, the non-applicability of MAMP for repayment of ECBs through raising of foreign equity will provide greater flexibility in structuring transactions.

·         Benchmark rate of any widely accepted interbank rate or ARR of 6-month tenor, applicable to the currency of borrowing plus 500 bps for foreign currency ECBs.

·         Benchmark rate of prevailing yield of the Government of India securities of corresponding maturity plus 450 bps for INR ECBs.

·         The cost of borrowings of an ECB is required to be in line with prevailing market conditions. This is not required to be to the satisfaction of the AD Bank, as originally envisaged under the draft ECB amendment regulations issued in October 2025.

·         In case of eligible ECBs with average maturity period of less than three years, the cost of borrowing shall be in compliance with cost ceiling specified for Trade Credit under these regulations. In the case of fixed rate loans, the floating rate plus spread of the corresponding swap shall not be more than the ceiling.

·         The ceiling of 2% on penal/default interest and prepayment penalty under the Erstwhile ECB Framework has been done away with and linked with prevailing market conditions.

·         It has been clarified that the cost of borrowing excludes all statutory taxes payable in relation to an ECB (which was limited to only withholding taxes in the definition of “all-in cost” under the Erstwhile ECB Framework).

·         The specific restriction on use of ECB proceeds towards payment of the cost of borrowing has been deleted.

·         Allowing market participants to borrow and lend at a market determined rate rather than subject to a regulatory cap is a commendable change.

·         Further, we note that this restriction on the use of ECB proceeds for payment of cost of borrowing has been deleted.

The negative list, for which the ECB proceeds cannot be utilised consists of:

·          Real estate activities (not including development of industrial parks/integrated townships/SEZ purchase / long term leasing of industrial land as part of new project / modernisation or expansion of existing units or any activity under ‘infrastructure subsectors’).

·         Investment in capital market.

·         Equity investment.

·         While working capital, repayment of rupee debt and general corporate purposes are not prohibited end uses, ECBs for these purposes are subject to longer maturity requirements as detailed above.

·         On-lending for prohibited purposes and for working capital, repayment of rupee debt and general corporate purposes, except where the on-lending is by an NBFC.

Additionally application of ECB proceeds towards agricultural or plantation activities, construction of farmhouses, the business of chit funds or nidhi companies and trading in transferable development rights is restricted.

The negative list for end use has the following significant changes:

·         Application of ECB proceeds has been permitted for real estate business to a limited extent for construction development project and industrial park, subject to certain conditions.

·         Application of ECB proceeds has been permitted for agriculture to a limited extent in relation to floriculture, horticulture and cultivation of vegetables and mushrooms under controlled conditions, development and production of seeds and planting material, animal husbandry, pisciculture, aquaculture, apiculture and services related to agro and allied sector.

·         In contrast to the restrictions on use towards investment in capital markets and equity investments, the 2026 Regulations restrict transacting in listed/unlisted securities except for merger, amalgamation, arrangement, or acquisition of control in accordance with the Companies Act, 2013 (as amended from time to time) under which the entity is incorporated/established, Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (as amended from time to time), Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Insolvency and Bankruptcy Code, 2016 (as amended from time to time). This is further subject to the condition that borrowing shall be availed for strategic purposes only, i.e. those driven by the core objective of creating long-term value through potential synergies, rather than for short-term gains.

·         On-lending for any of the purposes for which funds cannot be borrowed and utilised under the 2026 Regulations is not permitted.

·         Proceeds of the ECBs cannot be utilised for repayment of a domestic INR loan (i) which was availed for an end-use restricted under the 2026 Regulations; or (ii) which is classified as a non-performing asset (NPA) as per the applicable prudential norms, without attracting a higher MAMP.

·         Narrowing down the restriction on use of ECBs for equity investments is a much-needed change as Indian corporates need multiple sources of funding to fund acquisitions and investments.

·         The 2026 Regulations make it clear that any acquisition as an ‘end-use’ is permitted only if there is acquisition of ‘control’ (as defined under the 2026 Regulations). Further, the 2026 Regulations prescribe an additional subjective test, whereby it needs to be established that any borrowing of ECB for acquisition of control, merger etc. is undertaken “for strategic purposes” and for “creating long term value”. However, the ability to fund incremental stakes, as long as those result in achievement of 26%, 51%, 75% or 90%, which has been permitted under the domestic acquisition financing guidelines, has not been included in the 2026 Regulations

·         Use of proceeds for refinancing of rupee loans without the requirement to comply with higher MAMP requirements is a positive change.

·         The applicable ECB limit has been increased to the higher of (A) aggregate outstanding ECBs of up to USD 1 Billion (taking into account the proposed ECB, other than ECB for refinancing); and (B) 300% of the borrower’s net worth as per its last audited standalone balance sheet (taking into account the total outstanding borrowings (external and domestic) of the borrower, but excluding non-fund based credit and funds raised through issuance of securities which are mandatorily convertible to equity).

·         The above limit does not apply to eligible borrowers which are regulated by financial sector regulators (such as NBFCs, Housing Finance Companies etc.)

·         The revised limit does not specify that it is a per financial year cap, but rather refers to an aggregate outstanding ECB of USD 1 billion. In some sense this may be a stricter test, since under the earlier regime, a borrower could have borrower USD 750 million in each financial year (and assuming a bullet maturity of 3 years for each ECB, in the first 3 years the outstanding could have been USD 2.25 billion). However, the RBI has permitted a higher limit if within 300% of the borrower’s net worth, taking into account all borrowings (other than non-fund based borrowings). The rationale appears to be that higher outstanding borrowings for companies with sufficient net worth is permissible. In the absence of net worth, the RBI has deemed an outstanding amount of USD 1 billion to be a prudent limit.

·         The above limits are not applicable to borrowers regulated by financial sector regulators – this provides greater freedom particularly to NBFCs, which are frequent borrowers, to raise ECB funding.

·         The security provisions in the 2026 Regulations have been broadened to allow for security to be provided on immovable assets, movable assets, financial assets and intangible assets (including intellectual property rights). The requirement of the Borrower being the security provider for certain types of collateral has been removed.

·         Further, the requirement to obtain AD Bank permission for creation of security has been removed.

Refinancing of an existing ECB by fresh ECB is permitted provided the outstanding maturity of the original borrowing is not reduced and all-in-cost of fresh ECB is lower than the all-in-cost of existing ECB. Indian banks are permitted to participate in refinancing of existing ECB, only for highly rated corporates (AAA) and for Maharatna / Navratna public sector undertakings.

·         The requirement of all-in-cost of fresh ECB to be lower than the all-in-cost of existing ECB has been removed.

·         The refinancing should not result in a breach of the MAMP of the original borrowing which is being refinanced.

·         The restriction in the existing regulations on refinancing INR ECBs with foreign currency ECBs has been removed.

·         The requirement limiting Indian banks to refinancing only in the cases of highly rated borrowers and certain public sector undertakings has been removed.

·         It should be noted that the Erstwhile ECB Framework as well as the draft ECB amendment regulations, required the cost of borrowing of a refinanced ECB to be lower than the ECB being refinanced. The omission of the requirement to ensure that the cost of borrowing for the fresh ECB is lower than the ECB being refinanced is a welcome change (and in line with the market based pricing approach of the 2026 Regulations).

·         The average maturity of the refinancing ECB should be at least equal to the outstanding average maturity of the existing ECB (and can be lesser than the standard average maturity of 3 years). The clarification that the maturity of the refinancing ECB can be less than 3 years is helpful.

·         However, any existing long term ECBs (e.g. 7 years or 10 years on account of the end use) if refinanced under the new regime, will have to be for the remainder of the original maturity – the RBI has not provided any exemption on this.

·         Form ECB for obtaining LRN.

·         Form ECB-2 for reporting of actual ECB transactions is required to be filed on a monthly basis within 7 working days of the close of the month.

·         Changes to ECB parameters are required to be reported within 7 days of the change being effected – no specific form prescribed for this purpose.

·         Form ECB 1 to be filed for obtaining the LRN.

·         Revised Form ECB 1 to be filed for reporting any changes to the terms of the ECB, withing 7 days of the end of the month in which the changes became effective.

·         Form ECB-2 is required to be filed within 7 calendar days of the end of the month in which any ECB proceeds were received or debt servicing was undertaken.

·         Any borrower with an active LRN which fails to submit the relevant reporting to the AD bank for 4 consecutive quarters, and the AD bank is satisfied that the borrower is not reachable and/or is not operating at its registered office address, will be treated as an ‘untraceable borrower’ and will be reported to the RBI and the Directorate of Enforcement.