Highlights of the changes to the ECB regime post February 09, 2026

The Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026, dated February 09, 2026 (“Amendment”) overhauls India's External Commercial Borrowings (“ECB”) framework comprehensively, as it moves away from a restriction-driven regime; and towards an outcomes-focused framework anchored in market practice.

The key positive changes introduced include the following: (a) expanding eligible borrower eligibility; (b) removing the annual USD borrowing cap; (c) abolishing all-in-cost ceilings; and (d) streamlining reporting.

However, Regulation 3A of the Amendment introduces: (a) an express negative end-use list with important implications for securities transactions; and (b) new security/guarantee framework, further tightening the existing regime, and will require a careful review before finalising transaction structures. Additional new obligations also include: (a) untraceable borrower framework; (b) enhanced reporting for parameter changes; and (c) no objection certificate requirement for AD bank change, etc.

We have undertaken a comparative analysis and shown the changes introduced by the Amendment in the tables below:

A. CHANGES WITH RESPECT TO ELIGIBLE BORROWERS:

Particulars	Erstwhile position	Position under the Amendment
Scope of the definition of Eligible Borrowers	Specific categories were enumerated, FDI-eligible entities, registered Indian companies, certain NBFCs, etc. Eligibility was largely tied to the FDI eligibility under FEMA 20. ECB borrowings by startups was limited to USD 3 million per financial year.	The scope has been expanded and includes any person resident in India (other than an individual) that is incorporated, established, or registered under a Central or State legislation is an eligible borrower, subject to ECB being permissible under the laws governing that entity. Start-up specific cap for ECB borrowing has been removed. Startups are treated at par with other eligible borrowers.
Status of borrowers under restructuring/Corporate Insolvency Resolution Process (CIRP)	No specific provision was provided.	Enabling provisions have been expressly included. Now eligible borrowers under a restructuring scheme or CIRP may raise ECB only if specifically permitted under the restructuring or resolution plan.
Status of borrowers under investigation	No clear provision. Practice was to seek RBI guidance/AD bank NOC.	Process for eligible borrowers under investigation has been codified. Now eligible borrowers under investigation, adjudication, or appeal by law enforcement agencies for FEMA contraventions may raise ECB, but must disclose the pending matter in Form ECB 1/Revised Form ECB 1.

B. CHANGES WITH RESPECT TO RECOGNISED LENDERS:

Particulars	Erstwhile position	Position under the Amendment
Recognised lender categories	Restricted categories of recognised lenders were as follows: Lender resident outside India in FATF/IOSCO compliant country; foreign branches/subsidiaries of Indian banks (FCY only); multilateral/regional financial institutions where India is member; and IFSC financial institutions. FATF/IOSCO residency requirement was a hard gating criterion.	Expanded categories of recognised lenders are as follows: Any person resident outside India; Branch outside India of an entity whose lending business is regulated by RBI; and Financial institution or branch in IFSC. FATF/IOSCO country residency requirement abolished. Now any overseas person can lend.
Start-up significance	Angel investors, family offices, and early-stage overseas lenders from non-FATF countries could face eligibility issues.	Any person resident outside India qualifies as a recognised lender. Broad investor-friendly lender access may support bridge financing and wider overseas lender participation for startups.

C. CHANGES WITH RESPECT TO BORROWING LIMITS:

Particulars	Erstwhile position	Position under the Amendment
Annual cap	USD 750 million per financial year for general eligible borrowers under automatic route. USD 3 million per year for startups.	Annual cap removed entirely and replaced with new limits. New ceiling is higher of the following: (a) outstanding ECB up to USD 1 billion; OR (b) total outstanding borrowings (external + domestic) up to 300% of net worth per last audited standalone balance sheet. Note that the ceiling does not apply to entities regulated by financial sector regulators (RBI, SEBI, IRDAI, PFRDA).
Start-up-specific	USD 3 million per financial year cap was a binding constraint for startups.	Specific start-up cap eliminated.

D. CHANGES WITH RESPECT TO COST OF BORROWING:

Particulars	Erstwhile position	Position under the Amendment
All-in-cost ceiling	All-in-cost ceiling benchmark had to be followed. Violation of the ceiling required RBI approval or could render the ECB non-compliant as AD banks would refuse to generate a Loan Registration Number (“LRN”).	All-in-cost ceiling abolished. Cost of borrowing must be in line with prevailing market conditions. Only in case of ECBs with average maturity of less than 3 years, ceiling cost compliance has been provided.
Related party /arm's length	Related party ECBs required arm's length cost. 'Arm's length' was undefined in the Regulations, and reference was typically made to general principles.	Now 'Arm's length basis' has been expressly defined as a transaction between related parties conducted as if the parties were unrelated, so there is no conflict of interest.

E. CHANGES WITH RESPECT TO END USE RESTRICTION:

Particulars	Erstwhile position	Position under the Amendment
Regulatory level	Negative end-use list housed in Master Direction/ECB circular. Master Direction level = RBI administrative guidance.	Elevated to Regulation level (Regulation 3A of FEMA 3 (R)). Regulatory-level restriction — FEMA compounding directly applicable for breach.
NPA loans & restricted end-use loans	Repayment of domestic INR loans was restricted if the loan was for a negative end-use. No specific NPA-linked restriction.	New Regulation 3A (1) (h) expressly prohibits repayment of domestic INR loan: (i) availed for a restricted end-use; or (ii) classified as NPA as per applicable prudential norms. Impact: ECB cannot be used to rescue NPA loan situations.
On-lending	On-lending for restricted purposes was implicitly prohibited.	Regulation 3A (1) (i) expressly prohibits on-lending for any purpose for which funds cannot be borrowed under the Regulations. Applies to NBFCs, group financing structures, and holding company ECB-to-subsidiary lending arrangements.
Acquisition Financing	No clear provision.	Explicitly permitted as a corporate action exception. Carve outs for acquisition of control has been provided under Regulation 3A(1)(g). Explanation clarifies that borrowing must be for strategic purposes.

F. CHANGES WITH RESPECT TO PERMITTED SECURITY:

Particulars	Erstwhile position	Position under the Amendment
Asset classes for security	Charge permitted over immovable assets, movable assets, financial assets. Intangible assets/IP not specifically enumerated.	Schedule I, Para 11 (1) (a) now lists immovable assets, movable assets, financial assets, and intangible assets (including intellectual property rights) as permitted security. Highly significant for tech startups: IP assets (patents, software, trademarks) can now be explicitly charged as security for ECBs.

G. CHANGES WITH RESPECT TO GUARANTEES:

Particulars	Erstwhile position	Position under the Amendment
Guarantee framework	No express restrictions.	Schedule I, Para 11 (3) expressly provides that entities regulated by RBI are prohibited from providing (issuing) any type of guarantee in relation to ECBs.

H. CHANGES WITH RESPECT TO MINIMUM AVERAGE MATURITY PERIOD:

Particulars	Erstwhile position	Position under the Amendment
General MAMP	Manufacturing sector: MAMP of 1 – 3 years permitted for ECBs up to USD 50 million.	Manufacturing sector threshold raised: MAMP of 1 – 3 years permitted for ECBs up to USD 150 million (increased from USD 50 million).

I. CHANGES WITH RESPECT TO REPORTING OBLIGATIONS:

Particulars	Erstwhile position	Position under the Amendment
Forms	Not streamlined.	Schedule I, Para 16 streamlines reporting as follows: Form ECB 1: Details of ECB and LRN application. Revised Form ECB 1: Parameter changes — within 7 calendar days from end of month in which change took effect. Form ECB 2: Receipt of proceeds and debt servicing — within 7 calendar days from end of month. All forms submitted through Designated AD Category I bank with certification.
Pending investigations — disclosure	No clear guidance on disclosure of FEMA investigations at LRN application stage.	Now an Eligible Borrower must disclose any pending FEMA investigation/adjudication/appeal in Form ECB 1/Revised Form ECB 1.

J. CHANGES WITH RESPECT TO UNTRACEABLE BORROWERS:

Particulars	Erstwhile position	Position under the Amendment
Trigger	No prior provision.	A borrower with an active LRN is treated as 'untraceable' if: fails to submit any specified return for 4 consecutive quarters or more after the quarter in which a drawdown or debt servicing was scheduled per the last reported Form ECB 1; and the designated AD Category I bank is satisfied that: (i) neither borrower nor its auditors/directors/promoters were reachable despite documented multiple attempts; and (ii) borrower not operative at registered office as per bank records.
Consequence	No prior provision.	After 4 quarters: Designated AD Category I bank must inform both: (a) Reserve Bank of India; and (b) Directorate of Enforcement.
Start-up relevance	No prior provision.	Startups that raise ECB and subsequently pivot, wind down, change address, or have disrupted operations risk triggering the untraceable borrower framework if reporting lapses for 4 quarters. All start-ups must ensure registered office addresses are current with AD bank, maintain Form ECB 2 filing discipline, and appoint a compliance officer/law firm responsible for ECB reporting continuity.