Offshore debt after the 2026 ECB reforms
India's external commercial borrowing rules were rewritten in February 2026. The headline limits are larger and the cost ceiling is gone — which puts the burden of judgement back on the borrower.
External commercial borrowings — loans raised by Indian companies from overseas lenders — have long been the preserve of large corporates with treasury desks. The 2026 amendments to the framework make them a realistic option for a wider set of established mid-market companies, particularly those that earn in foreign currency.
What changed in February 2026
The Reserve Bank notified the Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026 on 16 February 2026. The automatic-route limit of USD 750 million per financial year has been replaced: an eligible borrower may now raise ECB up to the higher of USD 1 billion outstanding or 300 per cent of its net worth on a standalone basis.
The all-in-cost ceiling — the regulatory cap on interest and fees over a benchmark — has been removed, as has the ceiling on prepayment charges. The requirement now is simply that the cost of borrowing be in line with prevailing market conditions. Minimum average maturity and end-use rules have also been simplified.
Freedom is not the same as suitability
Removing the cost ceiling does not make offshore money cheaper; it makes the price a matter of negotiation. A foreign-currency loan at a headline rate well below domestic lending can become the most expensive facility on the balance sheet after a few years of rupee depreciation. The question is never 'what is the coupon?' but 'what is the fully hedged cost, and what happens if I choose not to hedge?'
Exporters with dollar or euro receivables have a natural hedge and can often justify a partially unhedged position. A domestic-revenue business borrowing in foreign currency is taking a currency view whether it intends to or not. For such companies, rupee-denominated ECB — where the overseas lender bears the currency risk — may be the more honest structure, even at a higher coupon.
Where the lenders sit
ECB lenders range from the overseas branches of Indian banks and the IFSC Banking Units at GIFT City to international banks, development finance institutions and, increasingly, private credit funds. Each prices risk differently and each has its own view of sector and ticket size. Matching a company to the lender with appetite this quarter matters as much offshore as it does at home.
Offshore debt suits companies with a clear use of funds, clean audited accounts and a finance team that can manage reporting obligations to the authorised dealer bank. For those companies, the 2026 framework has turned an institutional instrument into a practical one.
This article is general information about the financing landscape, current as of its publication date. It is not financial, legal or tax advice; regulations change, and every company’s position is different.
