Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026 

(February 09, 2026) Under this notification, the amendment revises the existing 2018 regulations governing External Commercial Borrowings (ECB), trade credits, and external commercial lending. It introduces updated definitions, clarifies key terms such as “arm’s length basis,” “cost of borrowing,” and “control,” and replaces Schedule I with a comprehensive new ECB framework. It also inserts a new Regulation 3A, which explicitly restricts end-use of borrowed funds in certain sectors such as chit funds, nidhi companies, real estate business (with specific conditions), certain agricultural activities, trading in transferable development rights, speculative securities transactions, and repayment of certain domestic INR loans. 

The notification strengthens the ECB framework by redefining eligibility criteria for borrowers and recognised lenders, revising borrowing limits (linked to USD 1 billion or 300% of net worth), prescribing minimum average maturity periods, clarifying permissible forms of borrowing (including FCCBs and FCEBs), and detailing cost ceilings and refinancing norms. It further refines rules on security creation, currency conversion, conversion of ECB into non-debt instruments, and reporting obligations through designated Authorised Dealer Category I banks. The amendment also introduces stricter compliance and monitoring mechanisms, including provisions for reporting delays, late submission fees, and classification of “untraceable borrowers.” 

The relevance of this amendment lies in its effort to streamline and modernise India’s foreign borrowing regime in line with evolving global financial practices. By clarifying definitions, tightening end-use restrictions, and rationalising borrowing limits and maturity norms, the regulation enhances transparency, reduces regulatory ambiguity, and aligns external borrowing with macroeconomic stability objectives. It also facilitates ease of doing business by allowing flexibility in currency conversion, refinancing, and restructuring, while maintaining prudential safeguards. 

The impact of this notification is significant for Indian corporates, financial institutions, and overseas lenders. It improves regulatory certainty, strengthens monitoring and reporting standards, and reduces the risk of misuse of foreign funds in speculative or restricted sectors. At the same time, it enables eligible entities especially in infrastructure and manufacturing – to access global capital markets more efficiently. Overall, the amendment reinforces India’s foreign exchange management framework by balancing capital inflows with financial stability, compliance discipline, and long-term economic development goals.