The Reserve Bank of India (RBI) has released the draft Foreign Exchange Management (Borrowing and Lending) (Fourth Amendment) Regulations, 2025, aiming to simplify external commercial borrowing (ECB) under the Foreign Exchange Management Act, 1999. The draft amendment expands the borrower and lender base, simplifies borrowing limits and the average maturity period, removes restrictions on the cost of borrowing for ECBs, revises end-use restrictions and simplifies reporting requirements.
The amendment proposes that the borrowing limits should be linked to the borrower’s financial strength and the ECB shall be raised at interest rates determined by the market.
In addition, it is proposed that eligible borrowers can raise ECBs to higher than outstanding ECBs of up to USB1 billion, or the total outstanding borrowing, whether external or domestic, of up to 300% of their net worth. This replaces the previous USD750 billion cap. Under the proposed amendments, an eligible borrower is defined as a resident in India (other than an individual) incorporated, established or registered under a central or state law.
An eligible borrower can only raise ECBs from a recognised lender, who is resident outside India a branch outside India, or an RBI-regulated entity’s International Financial Service Centre.
Addressing the complexity around the end-use intention of ECBs, a uniform minimum average maturity of three years has been proposed and rules outline what the funds cannot be used for. Periodic reporting also is expected to replace reporting at the time of drawdown, change in terms, refinancing, conversion to equity and prepayment.
