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RBI Plans Market-Linked Framework for External Commercial Borrowings

Written by: Team Angel OneUpdated on: 6 Oct 2025, 7:36 pm IST
RBI has proposed a framework for external commercial borrowings, easing rules on limits, costs, and usage; feedback open till October 24, 2025.
RBI Plans Market-Linked Framework
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The Reserve Bank of India (RBI) has released draft regulations to change how external commercial borrowings (ECBs) are raised. The new rules link borrowing limits to a company’s financial position. As per the news reports, eligible borrowers may raise the higher of $1 billion or up to 300% of their net worth, based on their latest audited balance sheet.

Interest Rates and Costs

The draft framework proposes doing away with the current cost ceiling of 450 basis points over benchmark rates. Instead, ECBs will be raised at market-linked rates. At present, foreign currency loans are tied to the 6-month LIBOR or equivalent, while rupee borrowings are linked to government security yields.

End-Use and Tenure

Restrictions on how borrowed funds can be used, along with minimum average maturity (MAM) requirements, have been simplified. At present, the minimum tenure is 3 years, with longer terms required for specific uses. The new framework is expected to provide more flexibility to borrowers.

Compliance and Reporting

RBI has also proposed easing compliance requirements. Borrowed funds must be repatriated and credited to an Indian bank account. Until deployment, they may be parked in fixed deposits for a maximum of 12 months. For permitted foreign currency use, funds can be kept in overseas accounts or invested in high-quality deposits.

Acquisition Financing

The proposals include allowing domestic banks to finance acquisitions, which was previously restricted. While foreign branches of Indian banks could fund acquisitions abroad, they were not allowed to finance such transactions domestically. Banks will be required to adhere to internal lending limits under the new norms.

Borrowing Trends

In FY25, Indian companies raised $61 billion through ECBs, with non-bank lenders accounting for a large share. In Q1 FY26, net ECB inflows rose to $4.6 billion from $2.8 billion a year earlier. In July 2025 alone, Indian firms filed proposals worth $3.32 billion, including $650 million by Credila Financial Services and $500 million by Reliance Power.

Read More: Change in Toll Payments: Check How Much You Will Have to Pay Without FASTag!

Conclusion

The draft framework is open for public feedback until October 24, 2025. The proposals are aimed at simplifying procedures and linking borrowing more closely with market conditions

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing. 

Published on: Oct 6, 2025, 1:40 PM IST

Team Angel One

Team Angel One is a group of experienced financial writers that deliver insightful articles on the stock market, IPO, economy, personal finance, commodities and related categories.

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