RBI Policy
To issue final external commercial borrowing norms shortly
This story was originally published at 12:14 IST on 6 February 2026
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--RBI Malhotra: To issue final norms on external commercial borrowing shortly
NEW DELHI – The Reserve Bank of India will issue the final norms on external commercial borrowing shortly, Governor Sanjay Malhotra said Friday. "...we had earlier issued revised draft regulations for ECBs. They have been finalised and shall be notified shortly," Malotra said while presenting the sixth bi-monthly monetary policy statement.
The draft external commercia borrowing norms were proposed after the October Monetary Policy Committee meeting. Feedback on the regulations were to be submitted to the RBI by Oct. 24.
One of the key changes suggested in the draft norms include liberalising borrowing limits imposed on entities. As per the draft norms, borrowers can borrow up to $1 billion or 300% of the net worth, whichever is higher, compared to the current cap of $750 million per financial year under the automatic route. However, financial sector entities like banks and non-bank finance companies, already under regulatory oversight, are exempt from this cap.
The draft norms also proposed flexible currency options, permiting borrowers to switch between rupee and foreign currencies depending on market conditions.
The central bank had also said overseas loans must have a minimum average maturity period of three years, though manufacturers got flexibility to borrow for as little as one year but upto $50 million. The RBI had made it clear that costs of borrowing--including interest, fees, and charges--must remain aligned with market rates and cannot be paid out of borrowed proceeds themselves.
In line with the RBI's move to allow Indian banks to finance domestic acquisitions, the draft norms allows banks to extend capital raised via external commercial borrowing to fund mergers, acquisitions, amalgamations, provided they comply with their internal lending limits.
The draft regulation also explicitly lists prohibited end-uses for borrowed funds. Overseas loans cannot be diverted into speculative or high-risk businesses like chit funds, Nidhi companies, real estate trading, or agricultural activities that aren't open to foreign investment, the RBI had said. Similarly, borrowers cannot channel these funds into buying securities or engaging in risky trades, it had said.
Even on-lending--passing on borrowed funds to other entities--is restricted to tightly controlled scenarios, such as lending within a regulated group structure or through entities already monitored by the RBI.
Other key provisions under the draft norms included broadening eligibility criteria for borrowers and lenders. It allows any person resident in India (other than an individual) who is established or registered under a central or state Act, to access overseas funding. Similarly, the category of recognised lenders includes any person resident outside India, as well as foreign branches or International Financial Services Centres-based branches of entities engaged in regulated lending activities of the RBI.
It remains to be seen what changes the central bank will detail in the final norms, with external commercial borrowing becoming more and more important as a financial instrument for companies. As per latest data, Indian companies raised $2.40 billion through external commercial borrowings in November. Of the total, Indian companies raised $2.24 billion through the automatic route in November, with ONGC Videsh Ltd. being the largest borrower at $500 million. End
US$1 = INR 90.43
Reported by Priyasmita Dutta
Edited by Avishek Dutta
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