Borrowing from a foreign parent or lender is free of exchange-control approval in the UK and most Gulf markets, but India and China regulate it closely. India overhauled its external commercial borrowing (ECB) rules from 16 February 2026, replacing fixed caps and cost ceilings with a size limit linked to net worth, a single three-year minimum maturity and market-determined pricing. Reporting remains strict: a loan registration number before drawdown and a monthly return.
India's 2026 ECB framework
ECB rules now sit in Schedule 1 to the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018, as amended from 16 February 2026. A borrower may have ECB outstanding up to the higher of USD 1 billion or three times its net worth, instead of the previous USD 750 million a year. The minimum average maturity is a single three years, with a one-to-three-year option for manufacturers up to USD 150 million outstanding.
The all-in-cost ceiling has gone for ECB: pricing, prepayment charges and penal interest are market-determined. Any non-resident person may lend, including a foreign parent, a foreign bank or an IFSC institution. Proceeds may not be used for securities trading, real estate business or other FDI-prohibited sectors, and acquisition finance is limited to strategic acquisitions of control.123456
Registration and monthly reporting
The borrower files Form ECB 1 to obtain a loan registration number, then Form ECB 2 within seven calendar days after each month in which money is drawn or debt is serviced. The RBI Master Direction on ECB was shown as updated on 8 September 2026, so terms should be checked against the current text rather than older summaries, some of which still describe a cost ceiling.78
Other markets for contrast
China's State Administration of Foreign Exchange regulates capital-account items, including foreign debt, separately from current-account payments, even after relaxations since 2012. In Nigeria the NIPC Act guarantees transferability of loan servicing payments through an authorised dealer, which in practice depends on the capital having been documented on the way in. The UK has had no exchange control legislation since 1979, so intra-group loans raise tax and documentation points rather than approval points.91011
| Parameter | From 16 February 2026 | Earlier position | Source |
|---|---|---|---|
| Size limit | Higher of USD 1 billion outstanding or 3x net worth | USD 750 million per financial year | Vinod Kothari summary of amended regulations |
| Minimum average maturity | 3 years (1 to 3 years for manufacturers up to USD 150 million) | 3, 5, 7 or 10 years by end use | Vinod Kothari summary |
| Cost | Market-determined | All-in-cost ceiling over benchmark | Vinod Kothari summary |
| Lenders | Any non-resident person | Recognised lender categories | Vinod Kothari summary |
| Reporting | Form ECB 1 for LRN; ECB 2 within 7 days after month end | Same forms | Vinod Kothari summary |
Decisions to make
- Is the Indian borrower's planned ECB within the higher of USD 1 billion or three times net worth?2Above the limit the loan falls outside the automatic framework.
- Will the loan have an average maturity of at least three years?3Shorter loans are permitted only for manufacturers within the USD 150 million allowance.
- What will the proceeds be used for?6Securities trading, real estate business and other FDI-prohibited uses are excluded.
- Who will file Form ECB 1 and the monthly ECB 2?7A loan registration number is obtained through Form ECB 1 and monthly returns are due within seven days of month end.
- Does the receiving country regulate foreign debt as a capital-account item?911China and India do; the UK does not, which changes the timeline for intra-group funding.
Documents usually needed
- Loan agreement with maturity, pricing and end-use clauses aligned with the ECB rules
- Board resolutions of borrower and lender
- Form ECB 1 and the loan registration number issued on it
- Latest audited net worth computation supporting the borrowing limit
- Monthly Form ECB 2 returns and drawdown and repayment evidence
Common mistakes
- Relying on pre-2026 summaries that still describe an all-in-cost ceiling and end-use maturity buckets
- Not obtaining a loan registration number through Form ECB 1
- Missing the seven-day monthly ECB 2 deadline
- Using proceeds for a prohibited purpose such as real estate business or on-lending
- Assuming an intra-group loan is unregulated because the lender is the parent
Questions businesses ask
Can a foreign parent lend to its Indian subsidiary without RBI approval?
Under the amended framework any non-resident may lend, and loans within the size, maturity and end-use rules need a loan registration number and monthly reporting.2357
Is there still a cap on interest for Indian ECB?
Not for ECB under the amended rules: cost is market-determined. Short trade credits still carry a cap.4
Do UK companies need approval to borrow from abroad?
No exchange control approval is needed; the UK abolished exchange control. Tax rules on interest still apply.11
What this guide does not yet confirm
These points need checking with a qualified local professional before you rely on them.
- The amended FEMA (Borrowing and Lending) Regulations and the ECB Master Direction could not yet be checked on the RBI website; all India ECB points come from a secondary summary and must be confirmed against the RBI text.
- China's current foreign debt quota (macro-prudential cross-border financing) parameters could not be confirmed.
- Withholding tax on interest paid abroad is covered by the Tax & International Structuring centre, not here.
- Saudi Arabia, UAE, Singapore, US, Germany and France have no general foreign borrowing approval regime confirmed; sector rules were not checked.
Sources and review status
Each statement is numbered to the source it was checked against. We use official sources where we can, and each statement says whether it was checked against an official or a secondary source. Sources last checked on 19 October 2026. None of it has been professionally reviewed yet: it is research checked against official and secondary sources by WONE Global, not legal or tax advice.
India's amended external commercial borrowing (ECB) framework took effect on 16 February 2026, with the ECB rules now set out in Schedule 1 to the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018. Central rule (RBI under FEMA). ECBs with a loan registration number obtained before 16 February 2026 stay under the earlier norms for compliance but follow the amended reporting rules.
Secondary source (Indian advisory firm). The RBI website refused automated access during research, so the amended FEMA (Borrowing and Lending) Regulations and the ECB Master Direction could not yet be checked; confirm against the RBI text.
Under the amended framework an Indian borrower may raise ECB up to the higher of USD 1 billion in outstanding ECB or three times its net worth, replacing the earlier cap of USD 750 million per financial year. Central rule. Borrowers regulated by the RBI, SEBI, IRDAI or PFRDA are outside this limit; refinancing ECBs are excluded from the amount. Net worth basis to be confirmed against the RBI text.
Secondary source (Indian advisory firm). The RBI website refused automated access during research, so the amended FEMA (Borrowing and Lending) Regulations and the ECB Master Direction could not yet be checked; confirm against the RBI text.
The minimum average maturity period for ECB is a single three years, replacing the earlier three-, five-, seven- and ten-year buckets tied to end use; manufacturing companies may raise ECB with a maturity of one to three years up to USD 150 million outstanding. Central rule. Conversion into non-debt instruments, refinancing, debt waivers and certain repayments are exempt from the minimum maturity.
Secondary source (Indian advisory firm). The RBI website refused automated access during research, so the amended FEMA (Borrowing and Lending) Regulations and the ECB Master Direction could not yet be checked; confirm against the RBI text.
The amended ECB framework sets no all-in-cost ceiling for ECB: the cost, prepayment charges and penal interest are market-determined. Central rule. Trade credits with a maturity under three years keep a cap of benchmark plus 3% (foreign currency) or plus 2.5% (rupee).
Secondary source (Indian advisory firm). The RBI website refused automated access during research, so the amended FEMA (Borrowing and Lending) Regulations and the ECB Master Direction could not yet be checked; confirm against the RBI text.
Any non-resident person, including an individual, may lend under the amended ECB framework, as may financial institutions or branches in an Indian IFSC and foreign branches of RBI-regulated lenders. Central rule. Any entity permitted under applicable law may borrow; borrowers under insolvency resolution may borrow only if the approved plan expressly allows it.
Secondary source (Indian advisory firm). The RBI website refused automated access during research, so the amended FEMA (Borrowing and Lending) Regulations and the ECB Master Direction could not yet be checked; confirm against the RBI text.
ECB proceeds may not be used for trading in listed or unlisted securities or in sectors where foreign direct investment is prohibited, such as real estate business, and acquisition finance is allowed only for strategic acquisitions of control. Central rule. The negative list follows the FDI-prohibited sectors in the FEMA (Non-debt Instruments) Rules; on-lending for restricted purposes is also prohibited.
Secondary source (Indian advisory firm). The RBI website refused automated access during research, so the amended FEMA (Borrowing and Lending) Regulations and the ECB Master Direction could not yet be checked; confirm against the RBI text.
An Indian borrower reports an ECB in Form ECB 1 to obtain a loan registration number, and files Form ECB 2 within 7 calendar days after the end of each month in which proceeds are received or debt is serviced. Central rule. Changes to reported parameters go in a revised Form ECB 1 within 7 calendar days after the month of change.
Secondary source (Indian advisory firm). The RBI website refused automated access during research, so the amended FEMA (Borrowing and Lending) Regulations and the ECB Master Direction could not yet be checked; confirm against the RBI text.
The RBI Master Direction on Foreign Investment in India (issued 4 January 2018) is shown as updated up to 15 June 2026, and the Master Direction on External Commercial Borrowings, Trade Credits and Structured Obligations as updated on 8 September 2026. Central rule (RBI).
The listing was opened; the Master Direction texts themselves could not yet be checked. Reused from market guide claim in-banking-004.
SAFE has relaxed the administration of certain capital-account items since the end of 2012, but capital-account transactions remain separately regulated. Capital-account items: changes in debt and equity from capital flows.
Secondary source. Reused from market guide claim cn-banking-003.
The NIPC Act guarantees foreign investors unconditional transferability, through an authorised dealer in a freely convertible currency, of net dividends, loan servicing payments and sale proceeds.
Official NIPC summary, stated to be not legally binding; the underlying Act could not yet be checked directly. Section references in the booklet are inconsistent in places. Reused from market guide claim ng-banking-001.
The Exchange Control Act 1947 ceased to have effect under section 68 of the Finance Act 1987, so there is no general UK exchange control legislation restricting capital movements or profit repatriation. Sanctions, anti-money laundering rules and tax withholding still apply to cross-border payments. Section 68 preserves a Treasury certificate power only for acts done before 13 December 1979.
The abolition is confirmed from the statute; the second half of the statement (no other general exchange control law) is an inference not stated on a current official page. Reused from market guide claim gb-banking-g01.
Questions on this topic
11 statements on foreign borrowing rules
