What changed
The Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026 substitute Schedule I, which governs ECB, and took effect on publication in the Gazette on 16 February 2026. The borrowing limit is the higher of outstanding ECB of USD 1 billion, or total outstanding external and domestic borrowing of 300% of net worth as per the last audited standalone balance sheet. The proposed ECB counts towards the limit. Borrowers regulated by a financial sector regulator are outside this limit.
The cost of borrowing must be in line with prevailing market conditions. ECB with an average maturity below three years must also stay within the trade credit cost ceiling. The minimum average maturity is three years; manufacturing borrowers may borrow for one to three years where their outstanding ECB does not exceed USD 150 million. Call and put options cannot be exercised before the minimum average maturity.
Form ECB 1 is filed through the AD bank to obtain the loan registration number (LRN), and drawdown is allowed only after that. Changes are reported in a revised Form ECB 1, and drawdowns and debt servicing in Form ECB 2, in each case within seven days from the end of the month in which the event occurs. ECB with an LRN obtained before the change continues under the earlier rules, except that reporting follows the new rules.
Who is affected
Companies and LLPs borrowing from overseas lenders, and their AD banks.
Effective dates
| Item | Date or period |
|---|---|
| Notification | 9 February 2026 |
| In force (Gazette publication) | 16 February 2026 |
| Form ECB 1 (LRN) | Before the first drawdown |
| Form ECB 2 and revised ECB 1 | Within 7 days from the end of the month of the event |
What to do now
- Work out headroom under both tests (USD 1 billion and 300% of net worth) before signing a new facility.
- Check the minimum average maturity and any call or put options against the term sheet.
- Get the LRN through the AD bank before the first drawdown.
- Diarise the monthly ECB 2 date for every drawdown and repayment.
Penalty or consequence if missed
Delays in reporting Form ECB 2 or a revised Form ECB 1 can be regularised by paying the late submission fee set out in RBI’s Master Direction on External Commercial Borrowings, within the limits allowed for it; the current amounts are in the Master Direction on rbi.org.in. Raising ECB beyond the limits, drawing down before the LRN or breaching the minimum average maturity is a contravention under Section 13 of FEMA, with a penalty of up to three times the sum involved, unless it is compounded.
Official source
Effective: 16 Feb 2026 · Note published · Last reviewed
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This note summarises a public notification for general information. It is not professional advice and does not cover every condition or exception, and the rule can change again by a later notification. Read the notification itself before acting on it, or consult a qualified professional on your own facts.