ECB (external commercial borrowing): meaning and 2026 rules
ECB is a loan raised by an Indian entity from a recognised foreign lender. RBI's 2026 framework raised the limit to USD 1 billion or 300% of net worth.
Short answer
ECB, or external commercial borrowing, is a commercial loan raised by an eligible Indian entity from a recognised non-resident lender, in foreign currency or Indian rupees, under FEMA. The RBI overhauled the framework through amended borrowing and lending regulations effective 16 February 2026, widening eligible borrowers to include LLPs and raising borrowing limits.
- Framework effective
- 16 February 2026
- Borrowing limit
- Higher of USD 1 billion outstanding or 300% of net worth
- Minimum average maturity
- 3 years (1 to 3 years allowed for manufacturing, within a cap)
- Reporting
- Form ECB-2, event-based
Key features of the 2026 framework
Under the revised regulations notified on 9 February 2026 and published on 16 February 2026, any non-individual resident incorporated or registered under a Central or State Act and permitted by applicable law can borrow, which now includes LLPs. The limit rose from USD 750 million to the higher of USD 1 billion outstanding or 300% of the borrower's standalone net worth. The minimum average maturity was standardised at three years, with shorter tenors allowed for manufacturing companies within a USD 150 million cap. Cost of borrowing is to be in line with market conditions, with arm's length pricing for related party lenders.
Reporting requirements
Before drawing down, the borrower obtains a Loan Registration Number from the RBI through its authorised dealer bank. Under the new framework, Form ECB-2 moved from monthly to event-based filing: it is due within seven calendar days after the end of the month in which ECB proceeds are used or debt is serviced. ECBs raised before 16 February 2026 continue under the old terms, except for reporting.
Why it matters for startups
ECB lets growth-stage companies borrow from foreign parents, investors or banks, often more cheaply than domestic debt. End-use restrictions still apply, such as bars on real estate and speculative investment. Work with your AD bank early, check end-use and pricing rules, and set up the event-based reporting process so filings are not missed.
Related services
Sources
- EY India: RBI revises the borrowing and lending (ECB) framework, 2026
- Reserve Bank of India: FEMA master directions
Written by the Refogo Editorial Team from the official sources above and checked on 2026-10-31. Laws, rates and due dates change, and authorities often extend deadlines, so confirm your own case with a qualified professional. This is general information, not legal or tax advice. Read our editorial policy or report an error to support@refogo.com.
Common questions
Can an LLP raise ECB?
Yes. The 2026 framework extended eligibility to LLPs and other entities incorporated or registered under a Central or State Act.
Can a startup borrow from its foreign investor under ECB?
Yes, a foreign equity holder is a recognised lender, subject to the framework's conditions and arm's length pricing.
Do old ECBs follow the new rules?
ECBs raised before 16 February 2026 continue under the earlier terms, except that the new reporting rules apply.