MUMBAI: The Reserve Bank of India has released updated guidelines for External Commercial Borrowings (ECBs), revising limits, relaxing maturity requirements, and eliminating cost caps.
Under these new regulations, eligible borrowers can secure ECBs up to the greater of $1 billion in outstanding borrowings or 300% of their net worth as per the most recent audited balance sheet. Previously, the borrowing cap was set at $750 million. This update comes at a time when India’s ECB transactions have been on the rise, with Indian companies raising a record $61 billion through this route in FY25, compared to $48 billion in FY24.
The RBI has noted that non-fund based facilities and mandatorily convertible equity instruments will not be counted within the borrowing cap.
Moreover, the central bank has established that funds must have a minimum average maturity of three years, allowing manufacturers to raise up to $150 million with maturity periods ranging from one to three years.
Pricing standards will now align more closely with market benchmarks. ECBs with maturities under three years will follow cost ceilings designated for trade credits. For fixed-rate loans, the all-in-cost ceiling will include floating benchmarks plus applicable swap spreads.
Funds intended for rupee expenditures must be transferred to an INR account within one month. Surplus funds can be invested in unencumbered fixed deposits for up to a year. Funds for foreign currency expenditures may remain in domestic or overseas foreign currency accounts and invested in short-term debt instruments with a maturity of up to one year.
Restrictions apply to the end-use of borrowed funds; they cannot be utilized for chit funds, Nidhi companies, real estate businesses, or the construction of farmhouses, agriculture, and animal husbandry.
