RBI’s overhaul of External Commercial Borrowing (ECB) norms has not only widened access to overseas capital for real estate and infrastructure, it has also fundamentally changed how I, as a promoter or investor, should think about foreign borrowing in India. In this article, I walk through the old vs new ECB framework and how infrastructure firms can practically use these relaxations without compromising on prudence.
What has RBI changed in the ECB framework?
In February 2026, RBI amended the ECB framework through changes to the Foreign Exchange Management (Borrowing and Lending) Regulations, 2026 and the related Master Directions. The intent is clear: rationalise the rules, expand access, and align pricing and structures more closely with global market reality, while retaining safeguards on end-use and risk.
A key shift is from a narrow, sector-based eligibility model to a broader, entity-based approach, allowing any non-individual resident entity incorporated under central or state law to raise overseas loans subject to approvals and compliance. For real estate, infrastructure and allied sectors, RBI has also clarified what construction and development activities can be financed via ECB, which reduces ambiguity and improves planning.
Old vs new ECB norms: what has changed?
When I compare the earlier ECB framework with the revised rules, five areas stand out: cost, limits, maturity, eligibility and end-use.
1. Cost of borrowing (all‑in‑cost ceiling)
Under the old regime, ECBs had an all‑in‑cost ceiling over a benchmark (like SOFR/Libor equivalents) that capped interest and related fees. This was meant to prevent excessive foreign borrowing costs but often made deals hard to structure in volatile markets.
Under the new framework, RBI has removed the all‑in‑cost ceiling and allowed borrowing costs to be market-driven, with some conditions for shorter maturities and trade-credit–like structures. For fixed-rate loans, pricing has to align with the floating benchmark plus relevant swap spread but is no longer bound by a rigid RBI cap.
2. Borrowing limits
Earlier, the standard cap for many eligible borrowers was lower, and approvals were more fragmented across categories and routes.
Now, eligible borrowers can raise ECBs up to the higher of 1 billion USD in outstanding borrowings or 300% of their net worth (based on the latest audited standalone balance sheet), which is a clear and substantial step-up from the earlier 750 million USD cap cited in policy commentary. This significantly expands headroom for larger infrastructure and real estate platforms with stronger balance sheets.
3. Maturity norms
The old framework imposed stricter minimum average maturity periods, especially for certain uses like rupee expenditure, refinancing and specific sectors.
Under the revised regime, RBI has eased certain maturity conditions, allowing more flexibility, particularly for borrowers with stronger credit profiles and within defined risk parameters. However, longer-gestation uses such as large infrastructure and core construction still demand appropriately longer tenors, and ECBs above certain thresholds or for specific end-uses often need longer average maturities.
4. Eligible borrowers and recognised lenders
Previously, eligibility was determined more by sector, with a narrower range of entities able to tap ECB and tighter specifications on who could lend.
Now, any non-individual resident entity incorporated under central or state law can be an eligible borrower, and the pool of recognised lenders has been broadened to include non-resident entities, overseas branches of RBI-regulated lenders, and financial institutions in IFSCs. RBI has also clarified that existing ECBs will continue under old norms, with some changes to reporting timelines, while new borrowings follow the revised framework.
5. End-use clarity and operational flexibility
Under the older system, end-use restrictions were more rigid and often interpreted conservatively, especially around land, real estate, and certain rupee expenditures.
The new rules explicitly permit ECB use for township development, residential and commercial projects, integrated developments, city-level infrastructure and specific asset classes like hotels, hospitals and educational institutions, subject to safeguards such as completion of trunk infrastructure before plot sales. RBI has also introduced more operational flexibility, such as allowing surplus rupee ECB proceeds to be parked in fixed deposits for up to one year and permitting retention of foreign currency funds for relevant offshore spends in short-term debt instruments.
Snapshot: old vs new ECB norms
| Feature | Earlier ECB framework | Revised ECB framework 2026 |
|---|---|---|
| Cost ceiling | RBI-prescribed all‑in‑cost cap over benchmark. | All‑in‑cost ceiling removed, market-linked pricing. |
| Borrowing limit | Standard cap around 750 million USD for many cases. | Higher of 1 billion USD or 300% of net worth. |
| Eligibility approach | Sector-based eligibility. | Entity-based; any non-individual resident entity. |
| Maturity norms | Stricter, more prescriptive minimum tenors. | Eased and more flexible within risk rules. |
| End-use for realty/infra | More restrictive, limited clarity on land/construction. | Explicit permission for construction and infra with safeguards. |
| Operational flexibility | Tighter control on parking and use of proceeds. | Greater flexibility on rupee/FX parking and security structures. |
How real estate can use the new ECB norms
For real estate developers like me, the revised framework translates into clearer and broader funding possibilities across the lifecycle of a project.
I can now use ECBs for:
- Township, residential and commercial construction, integrated projects and city-level infrastructure such as roads, water and drainage, as long as I complete trunk infrastructure before selling plots.
- Hotels, hospitals and educational institutions where the focus is on genuine construction and development, not speculative land holding.
With cost caps removed and limits enhanced, I can explore longer-tenor foreign loans for large, phased projects where future cash flows are relatively predictable. At the same time, I need to consciously manage currency risk, align repayment schedules with expected sales inflows, and disclose structures transparently to lenders and regulators.
How infrastructure firms can utilise new ECB relaxations
The reforms are particularly meaningful for infrastructure firms – from core transport and utilities to industrial and logistics parks. If I am running an infrastructure platform, here is how I would think about using the relaxations.
1. Funding large, long-gestation projects
Infrastructure projects like highways, metro systems, renewable energy parks, ports and airports typically require massive upfront capital and have long payback periods. With higher ECB limits and more flexible maturities, I can structure longer-tenor loans that better match project life cycles, reducing the refinancing pressure I would otherwise face with shorter domestic loans.
For projects with dollar-linked or foreign-currency-linked revenues (such as certain port or airport concessions or export-oriented infrastructure), foreign currency ECBs may be particularly suitable, provided cash flows are robust and contracted. In all other cases, I would evaluate rupee-denominated ECBs or strong hedging to avoid exposing a purely rupee-revenue asset to unmanageable FX risk.
2. Developing industrial and logistics parks
The revised norms formally allow ECB funding for industrial parks subject to conditions like a minimum number of units, limits on the space any one entity can occupy, and a mandated share of industrial activity. As an industrial park developer, I can use ECBs to create internal roads, utilities, warehousing, processing facilities and plug-and-play units that attract manufacturing and logistics tenants.
Because industrial and logistics parks often need heavy upfront infrastructure before rental and service revenues stabilise, access to larger, longer-tenor ECBs can help smooth overall project financing. I would still blend ECBs with domestic term loans and equity to avoid over-concentration in one funding source.
3. Financing city-level and social infrastructure
Urban infrastructure – including water supply, sewage, waste management, local transport and social infrastructure like hospitals and educational campuses – is now more clearly within the scope of permitted ECB end-uses when structured appropriately. This gives infrastructure firms and special purpose vehicles a way to fund capex-heavy assets that deliver long-term public value.
For example, I could use ECBs to finance a network of hospitals or education campuses within a broader urban development project, while domestic banks finance complementary facilities or working capital. Here, I would pay special attention to aligning ECB tenors with concession periods or lease durations to avoid a maturity mismatch.
4. Supporting rupee capex and refinancing within rules
The new framework allows higher ECB limits for rupee capital expenditure in infrastructure under the approval route, and earlier policy reviews already recognised the need to fund domestic expenditure via external borrowings in a controlled manner. As an infra company, I can use ECBs – with RBI or government approval where needed – to fund rupee capex on large projects when domestic markets alone cannot meet the requirement at appropriate cost and tenor.
I can also examine refinancing of existing high-cost rupee debt with ECBs where regulations permit, thereby lowering overall cost of capital and freeing bank limits for other needs. However, I would ensure that any refinancing is backed by stable cash flows, robust covenants and adequate hedging, so that I am not simply swapping one set of risks for another.
5. Leveraging operational flexibility and security structures
RBI has allowed ECB proceeds meant for rupee expenses to be parked in INR accounts within a month of drawdown and invested in unencumbered fixed deposits for up to one year, and permitted foreign currency ECB proceeds to be retained and invested in short-term debt instruments for matching FX expenditure. This flexibility lets me time disbursements better, manage liquidity and avoid idle cash drag while staying compliant.
The revised norms also allow ECBs to be secured by charges on immovable, movable, financial and intangible assets (including intellectual property), as well as guarantees issued under the updated guarantees regulations. For an infrastructure platform, this means I can design security packages that work for both overseas and domestic lenders while preserving overall creditor protection and bankability of the project.
What this means for my financing strategy
For me, the ECB overhaul is not just a policy headline; it fundamentally broadens my capital-raising toolkit if I am in real estate or infrastructure. I now have more room to tap global pools of capital, negotiate pricing in line with market conditions and align borrowing structures with the long-term nature of my projects.
At the same time, the onus is on me to use this flexibility responsibly:
- I need to treat ECBs as part of a balanced capital structure, not as cheap money, and ensure that FX, interest rate and refinancing risks are fully understood and mitigated.
- I must strictly adhere to RBI’s end-use and reporting requirements and maintain strong governance and transparency, knowing that regulatory comfort and investor trust go hand in hand.
- I should design each project with real end-user value, timely execution and robust cash flow planning at the core, so that external debt – domestic or foreign – is always backed by real, sustainable economics.
If I follow these principles, the revised ECB norms can help me build more resilient, future-ready real estate and infrastructure assets that support India’s growth story while preserving financial stability.
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