The Reserve Bank of India issued amendments to the External Commercial Borrowing framework through Notification No. FEMA 3(R)(5)/2026-RB, dated 9 February 2026. The notification was published in the Official Gazette of India on 16 February 2026 and came into force on the date of publication. The amendments modify the existing ECB regulatory structure under the Foreign Exchange Management Act, 1999.
Background
External Commercial Borrowings constitute a significant channel through which Indian entities raise foreign currency debt from international lenders. The ECB framework, governed by regulations issued under FEMA 1999 and periodically updated by the RBI, prescribes eligibility criteria for borrowers, recognised lenders, permitted end-uses, borrowing limits, and compliance requirements.
The RBI has historically used the ECB framework as a policy lever to manage capital account flows and external debt sustainability. Amendments to the framework reflect evolving policy priorities around foreign exchange management, domestic credit conditions, and the needs of specific sectors.
The notification amends the Foreign Exchange Management (Borrowing and Lending) Regulations, updating provisions that govern the terms and conditions under which eligible Indian entities can access foreign currency borrowings.
Key Provisions
The notification introduces the following changes:
Amendment to existing regulations: The notification amends the Foreign Exchange Management (Borrowing and Lending) Regulations under FEMA 1999, modifying the framework applicable to ECBs raised by eligible Indian borrowers from recognised overseas lenders.
Operative date: The amendments came into force on the date of publication in the Official Gazette, being 16 February 2026. All ECB transactions entered into from this date onwards are governed by the amended provisions.
Regulatory authority: The notification was issued in exercise of powers conferred upon the RBI under the Reserve Bank of India Act, 1934, and the Foreign Exchange Management Act, 1999, reinforcing the dual statutory basis for ECB regulation.
Compliance framework: Existing ECB borrowers are required to ensure that their borrowing arrangements conform to the amended provisions for any drawdowns or modifications effected after the notification date.
Implications for Practitioners
Corporate lawyers and compliance teams advising entities with existing ECB facilities should conduct an immediate review of current borrowing arrangements against the amended framework. Any proposed drawdowns, renewals, or modifications to existing ECB facilities from 16 February 2026 onwards must conform to the updated provisions.
For financial institutions acting as intermediaries in ECB transactions, the amendments necessitate updating internal compliance checklists and documentation templates to reflect the revised regulatory requirements.
Practitioners should pay particular attention to transitional provisions, if any, that govern ECBs contracted before the notification date but with ongoing compliance obligations. Where the notification is silent on transitional treatment, the prudent approach is to seek clarification from the RBI or authorised dealer banks.
Companies planning fresh ECB issuances should factor the amended framework into their borrowing strategy and documentation process from the outset.