# External commercial borrowings and Form ECB 2, after the February 2026 revision

By CA Prachi Goel · Updated 2026-10-18 · Source: https://fxlayerhq.com/insights/ecb-and-ecb2-return

Expert opinion · FEMA reporting

**Short answer.** From 16 February 2026 a borrower other than an individual may raise an ECB up to the higher of outstanding ECB of USD 1 billion or total borrowing of 300 per cent of net worth, usually for at least three years. Drawdown needs a loan registration number. Form ECB 2 reports proceeds and debt service within seven calendar days after that month. Cost follows the market, unless maturity is under three years.

The February 2026 amendment rewrote the ECB schedule. Figures from the old framework, including the USD 750 million yearly cap, are printed in the regulations only as the text that was substituted. Use the schedule that the amendment inserted.

## Key points

- An eligible borrower is a person resident in India, other than an individual, incorporated, established or registered under a Central or State Act, and permitted to raise ECB under the laws that apply to it.
- The limit is the higher of outstanding ECB up to USD 1 billion, or total outstanding borrowing, external and domestic, up to 300 per cent of net worth on the last audited standalone balance sheet. It does not apply to borrowers regulated by a financial-sector regulator.
- Minimum average maturity is three years. A manufacturer may raise ECB of between one and three years up to USD 150 million outstanding of such shorter borrowings.
- Form ECB 2 is due within seven calendar days from the end of the month in which proceeds were received or debt was serviced. The current schedule does not repeat the older form's instruction to file a nil return in a quiet month.
- From 1 April 2026 the designated AD bank sends the return on to the Reserve Bank within seven calendar days of receiving it, and each delayed Form ECB 2 under one loan registration number is its own late-submission-fee instance.

## Who can borrow, and from whom

Schedule I of the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018, as substituted with effect from 16 February 2026 by Notification FEMA 3(R)(5)/2026-RB, says any person resident in India other than an individual, incorporated, established or registered under a Central or State Act, is an eligible borrower, if that person is permitted to raise an ECB under the Acts that apply to it. A borrower under a restructuring scheme or a corporate insolvency resolution process may raise an ECB only if the plan specifically permits it. A pending investigation, adjudication or appeal under FEMA does not by itself bar the borrowing, but it is disclosed in Form ECB 1, or in Revised Form ECB 1 if an ECB already exists.

A recognised lender is a person resident outside India, a branch outside India of an entity whose lending business the Reserve Bank regulates, or a financial institution or its branch set up in an International Financial Services Centre. The borrowing may be in foreign currency or in rupees, in any commercial arrangement that pays agreed interest, if any, and repays principal. Trade credit of original maturity up to three years is not an ECB. It sits in Schedule II.

## How much, for how long, and at what cost

The borrower may raise ECB up to the higher of outstanding ECB of USD 1 billion, or total outstanding borrowing, external and domestic, up to 300 per cent of net worth as per the last audited standalone balance sheet. Outstanding borrowing for this test excludes non-fund-based credit and funds raised through securities that are mandatorily convertible. The proposed ECB, other than a refinancing, is counted when the limit is checked. Borrowers regulated by a financial-sector regulator are outside this limit.

Minimum average maturity is three years. Call and put options are not exercisable before that maturity is complete. A borrower in manufacturing may also raise ECB with an average maturity between one and three years, up to USD 150 million outstanding of such borrowings. The maturity requirement is lifted in the cases the schedule lists, including conversion into non-debt instruments, repayment from the proceeds of non-debt instruments received after drawdown, a refinance that itself meets the rule, a waiver by the lender, and certain corporate actions.

The cost of borrowing is in line with prevailing market conditions. Where the average maturity is under three years, the cost has to meet the trade-credit ceiling in the regulations. The schedule no longer states an all-in-cost [spread](https://fxlayerhq.com/insights/bank-fx-spreads) over a benchmark. The USD 750 million yearly cap appears in the regulations only as the wording that existed before the February 2026 substitution. Do not use it.

The regulations define restricted end uses, including chit funds and Nidhi companies, capital-market investment, agricultural or plantation activities, real-estate activity or farm houses, and trading in transferable development rights. Read that definition with the schedule before agreeing an end use. This guide does not reproduce the longer negative list from the pre-2026 framework, because that list sat in the text the amendment replaced.

## The loan registration number and Form ECB 2

Drawdown is permitted only after the loan registration number is obtained from the Reserve Bank through the designated AD Category I bank. Form ECB 1 is the application that asks for it. A change in a parameter previously reported is Revised Form ECB 1, within seven calendar days from the end of the month in which the change took effect. The same form may also report a change in any other information previously given.

Form ECB 2 reports receipt of the proceeds and debt servicing, within seven calendar days from the end of the month in which the proceeds were received or the debt was serviced. Any event that changes the amount outstanding under that loan registration number is reported in Form ECB 2. RBI's list of returns uses the same seven calendar days and the same trigger. Proceeds meant for permitted rupee expenditure in India are credited to a rupee account with the designated bank by the end of the following month. Pending use, they may sit in an unencumbered deposit of up to one year with that bank.

An older printed Form ECB 2 on RBI's website tells the borrower to file a nil return within seven working days of month-end even when nothing happened. The schedule substituted in February 2026 does not say that. It ties the return to a month in which proceeds were received, debt was serviced, or the outstanding changed. A.P. (DIR Series) Circular No. 23 of 18 February 2026 replaced the forms in the reporting Master Direction. This guide has not re-read the instructions printed on that replacement form, so it does not confirm whether a completely quiet month still needs a nil return. Ask the designated bank which form it is using, and follow that form.

## Late submission, and an untraceable borrower

If the timelines are missed, the borrower may complete the reporting and pay the late submission fee under the Reserve Bank's guidelines. A.P. (DIR Series) Circular No. 25 of 30 March 2026, in force from 1 April 2026, makes three operational points. Form ECB 1 and Revised Form ECB 1 are treated as returns that do not capture flows, and the fee is computed on that basis. Each delayed Form ECB 2 under one loan registration number is a separate instance for the fixed part of the fee. The designated bank submits the completed, certified return to the Reserve Bank within seven calendar days of receiving it from the borrower, and it watches that any fee is paid. The fee itself is paid by NEFT or RTGS to the regional office after an email from the Reserve Bank acknowledges the return.

A borrower with a live loan registration number can be treated as untraceable if it fails to submit a specified return for four consecutive quarters or more after the quarter in which a drawdown or a debt service was scheduled in the last Form ECB 1, and the bank, after that period, is satisfied that the borrower, its auditors, directors and promoters could not be reached despite documented attempts and that the borrower was not operating at the registered office on the bank's records. If that follows a drawdown, the bank informs both the Reserve Bank and the Directorate of Enforcement.

Changing the designated bank needs a no-objection from the existing one. The bank may ask the Reserve Bank to cancel a loan registration number, at the borrower's request, only if there has been no drawdown. Form ECB 2 is filed by the borrower through that bank. The FxLayer platform does not prepare or submit it.

## Questions

**Is the ECB limit still USD 750 million a year?**

No. That figure is the wording the February 2026 amendment replaced. The schedule now allows the higher of outstanding ECB up to USD 1 billion, or total outstanding borrowing up to 300 per cent of net worth on the last audited standalone balance sheet.

**When is Form ECB 2 due?**

Within seven calendar days from the end of the month in which the proceeds were received or the debt was serviced, or in which something else changed the amount outstanding. The designated bank then has seven calendar days from receipt to send it to the Reserve Bank.

**Do we file Form ECB 2 in a month with no drawdown and no repayment?**

The schedule amended on 16 February 2026 does not require a return for a month in which nothing changed. An older form on RBI's website still asks for a nil return within seven working days. Confirm which form your designated bank is using after the circular of 18 February 2026.

**Can an individual raise an ECB?**

Not as an eligible borrower. The schedule excludes individuals. A borrower under insolvency or a restructuring can raise one only if the plan permits it.

## Sources

- [RBI Notification FEMA 3(R)/2018-RB: Borrowing and Lending Regulations, 2018, as amended up to 16 February 2026](https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11441)
- [RBI A.P. (DIR Series) Circular No. 25 of 30 March 2026: ECB returns and the late submission fee, in force from 1 April 2026](https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13345&Mode=0)
- [RBI: list of returns, including Form APR, FC-GPR, FC-TRS and Form ECB 2](https://rbi.org.in/Scripts/BS_Listofallreturns.aspx?id=2777)

This article is general information on Indian foreign exchange and tax rules as they stood on the date shown. It is not legal or tax advice. Rules and limits change; confirm the current position with your AD bank, the relevant RBI Master Direction or your adviser before acting.