The Reserve Bank of India (RBI) has eased the rules for Indian companies to raise money from overseas lenders, including widening the pool of eligible borrowers and raising the cap to $1 billion through the automatic route or 300% of their net worth per financial year, whichever his higher. Earlier, the annual ceiling was at $750 million.

The enhanced borrowing limit, however, will not apply to eligible borrowers that are regulated by financial sector regulators, such as non-banking financial companies (NBFCs).

There are several other relaxations in the amended external commercial borrowing (ECB) framework, while certain key safeguards around end-use, compliance and enforcement have been retained.

 "The amended regulations have rationalised the ECB framework by expansion of eligible borrower and recognised lender base, rationalisation of borrowing limits and restrictions on average maturity period. It has also removed restrictions on the cost of borrowing for ECBs, review of end-use restrictions and simplification of reporting requirements," the RBI said.

Under the new rules, the RBI has revised the minimum time over which the loan must be repaid. ECBs must have a minimum average maturity period of three years. Manufacturers, however, are allowed to raise ECBs up to $150 million with maturity tenures between one and three years.

On the cost of external commercial borrowings, the RBI has removed restrictions and said that it should be market determined. In the case of fixed-rate loans, the floating rate plus spread of the corresponding swap should not exceed the prescribed ceiling.

Expanding the eligible borrower and lender base, the RBI has proposed allowing any entity, including those under restructuring or investigation, to raise funds through ECBs.

ECB funding can be used for township development, residential and commercial construction, integrated projects and city-level infrastructure. Developers, however, can sell plots only after completing trunk infrastructure such as roads, water supply, street lighting, drainage and sewerage.

In case of borrowing for industrial parks, a minimum number of units, caps on space concentration and a mandated share of industrial activity has been mentioned.

Pending utilisation, proceeds from ECBs can be utilised in deposit or other debt instruments with maturity of up to one year. 

Funds raised through the ECB route can be used to purchase land and immovable property, subject to specified restrictions and conditions.

The RBI, however, has retained restrictions on certain end uses. Funds raised through the overseas route cannot be used for chit funds, Nidhi companies, real estate business, construction of farmhouses, or investment in the stock market, among other prohibited activities.

RBI-regulated entities are allowed to use ECB funds for on-lending to individuals. 

ECBs are foreign-currency or rupee-denominated loans raised by eligible resident entities from recognised non-resident lenders. They are regulated by the RBI under the Foreign Exchange Management Act (FEMA).

In FY 25, Indian corporates raised $61 billion through the ECB route, up from $48 billion a year ago. The weakening of the rupee has led to some slowdown in ECBs this financial year. The first half of FY26 has seen ECB flows of $18.49 billion compared to $25.42 billion a year earlier.