New Delhi: In a major policy shift aimed at easing access to overseas credit, the Reserve Bank of India (RBI) on Friday released draft proposals to relax the rules governing external commercial borrowings (ECBs). The move, the central bank said, is intended to enhance credit flow into the economy and provide Indian companies with greater flexibility in raising funds abroad.
Under the draft framework, companies incorporated in India will be allowed to borrow up to USD 1 billion or 300% of their net worth, whichever is higher. This significantly expands the borrowing headroom compared to the current automatic route ceiling of USD 1.5 billion, which required additional approvals for larger amounts.
Another key change is the removal of cost caps on most overseas borrowings, allowing interest rates on such loans to be freely determined by market conditions. However, borrowings with maturities below three years will continue to face restrictions similar to those on short-term trade credit.
The proposals also seek to expand the pool of eligible borrowers and lenders. All entities incorporated in India, including those undergoing restructuring or under investigation, may be permitted to access overseas credit, subject to conditions and disclosures. In addition, the recognized lender base will be widened, providing Indian companies with more funding options.
In a bid to further simplify the process, the RBI has also suggested easing end-use restrictions and reducing the compliance burden associated with reporting and regulatory requirements.
The central bank has invited feedback from stakeholders on the draft proposals until October 24, 2025, after which the final guidelines will be issued.
Industry experts say the move could significantly increase the flow of foreign capital into India’s infrastructure, manufacturing, and services sectors. However, analysts also caution that while easier rules may benefit credit-starved companies, they may also expose borrowers to greater currency and repayment risks in a volatile global environment.
The RBI maintained that the proposed reforms would “enhance ease of doing business, improve access to global capital markets, and strengthen India’s position as an attractive investment destination.”
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