RBI Issues Final Revised Rules On External Commercial Borrowings

The RBI has tightened and clarified its stance on External Commercial Borrowings, a key source of foreign capital for Indian companies. According to the revised guidelines, existing ECBs will continue to be governed by the regulations under which they were originally availed, ensuring consistency and regulatory stability.  

One of the major changes is the prohibition of on-lending ECB funds for real estate businesses, a move aimed at curbing speculative activity in the sector. However, the central bank has allowed on-lending to individual borrowers, providing flexibility for sectors such as housing finance and consumer credit.  

Significantly, the RBI has permitted the use of ECB proceeds for acquisition of “control,” a step expected to facilitate mergers, acquisitions, and strategic investments. Analysts believe this will boost corporate restructuring and cross-border deal-making.  

The announcement comes amid reports of temporary disruptions in digital services, with Downdetector noting outages for thousands of users in India, though unrelated to the ECB guidelines.  

Key Highlights  

• Existing ECBs governed by original regulations  
• On-lending not permitted for real estate businesses  
• On-lending allowed to individual borrowers  
• Acquisition of “control” permitted as an end-use of ECB funds  
• Final revised rules aim to balance flexibility with oversight  

Sources: Reserve Bank of India, Reuters, Economic Times