Form ECB 2: reporting drawdown and servicing of external commercial borrowings

What changed in 2026

RBI notified the Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026, effective 16 February 2026. The reforms raised the automatic route limit to the higher of USD 1 billion outstanding ECB or total borrowings up to 300% of net worth, removed the all-in-cost ceiling, and moved the reporting framework into the regulations.

The old Form ECB is now called Form ECB 1, and changes are reported through a Revised Form ECB 1. A.P. (DIR Series) Circular No. 25 of 30 March 2026, effective 1 April 2026, refined the LSF rules for ECB returns.

Who can borrow under the new framework

Under the 2026 regulations, any person resident in India other than an individual, incorporated or set up under a Central or State Act, can raise ECB subject to sectoral permissions. This includes companies and LLPs. Entities under investigation or adjudication under FEMA may still borrow if they disclose it in Form ECB 1. The earlier ceilings on borrowing cost were removed, so pricing is left to market conditions, but the end-use restrictions and reporting obligations remain.

Who files ECB 2 and when

Any borrower with an ECB under a Loan Registration Number reports through Form ECB 2. The return covers drawdowns, principal repayments, interest and other payments made during the month. It is submitted to the AD bank within 7 calendar days from the end of the month; the earlier rule spoke of working days.

Commentaries differ on whether a nil return is needed for months without transactions under the 2026 rules, so confirm the position with your AD bank. The AD bank must forward complete, certified returns to RBI within 7 calendar days of receipt.

Certification and documents

The return is signed by the borrower's authorised official and certified as required by the AD bank, typically by a chartered accountant or company secretary. Keep loan agreements, bank advices for drawdowns and repayments, interest computations and the LRN letter ready.

Form ECB 1 must be filed and the LRN obtained before the first drawdown. Changes in lender, repayment schedule, interest rate or currency are reported in a Revised Form ECB 1 within 7 calendar days of the end of the month in which the change takes effect.

Late filing and LSF

Delayed ECB returns can be regularised by paying an LSF. For ECB 2, the amount involved is the gross inflow or outflow, whichever is greater, and each delayed return under an LRN counts separately for the fixed ₹7,500 component. Form ECB 1 and Revised Form ECB 1 are treated as non-flow returns from 1 April 2026.

The LSF is paid to the RBI regional office by NEFT or RTGS after RBI acknowledges the return. Not paying the LSF is itself a contravention, and AD banks now monitor whether borrowers pay.

Common mistakes

Errors include drawing down before the LRN is issued, missing months because a single drawdown seemed minor, reporting net instead of gross amounts, and not filing the Revised Form ECB 1 when terms change. Borrowers also sometimes forget that ECB balances must be included in the FLA return.

Step by step

1. 1Obtain LRN

   File Form ECB 1 through the AD bank before drawdown.

2. 2Track transactions

   Record drawdowns, repayments and interest each month.

3. 3Prepare ECB 2

   Fill the return with gross figures for the month under the LRN.

4. 4Certify and submit

   Get the required certification and submit to the AD bank within 7 calendar days.

5. 5Report changes

   File Revised Form ECB 1 for any change in loan terms.