RSM India

New External Commercial Borrowings Regulations / Framework - Consolidation and Liberalisation

As a part of on-going effort, the Reserve Bank of India (RBI) has consolidated and liberalized the regulatory provisions dealing with borrowing and lending in foreign exchange as well as Indian Rupees (INR). It has combined two separate regulations[1] on these aspects and notified the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 (also referred to as New ECB  Regulations, 2018) on 17 December 2018 (Notification No. FEMA.3(R)/2018-RB) effective from the said date.

Subsequent to the issue of the said New ECB Regulations, 2018, RBI with the intention to rationalize the extant ECB Master Direction, has also issued the ECB Policy – New ECB Framework vide circular No. 17 dated 16 January 2019 (herein referred as New ECB Framework).

The amended policy i.e. New ECB Framework will come into effect from the date of issuance i.e. 16 January 2019. However, the Master Direction No. 5 (FED Master Direction No.5/2015-16) dated 1 January 2016 is yet to be updated to reflected the changes in New ECB Framework.

Some of the major changes as per the new policy are as under:

  1. The New ECB Framework has merged earlier Tracks I and II ECB as “Foreign Currency denominated ECB” and merged Track III and Rupee Denominated Bonds (RDBs) framework as “Rupee Denominated ECB".
  2. The New ECB Regulations, 2018 has removed ‘firm’ from the definition of Indian Entity and has expanded its scope to include limited liability partnerships, which shall now be eligible to receive ECBs.
  3. The revised framework has expanded the eligible borrowers to even include service sector and trading entities in line with the FDI Policy.
  4. It is pertinent to note that the New ECB Framework does not cover provisions pertaining to Trade Credit. RBI may issue a separate notification for the same.
  5. Late Submission Fess (LSF) for delay in reporting

As per revised ECB framework, any borrower who is otherwise in compliance of ECB guidelines, except for a delay in reporting of drawdown of ECB proceeds before obtaining LRN or Form ECB 2 returns, can regularize the delay by payment of late submission fee for delay in reporting. The fees will have to be paid via demand draft in favor of RBI, or any mode specified therewith. The computation of late submission fees is as under:


Period of delay

Applicable LSF

Form ECB 2

Up to 30 calendar days from due date of submission

INR 5,000

Form ECB 2 / Form ECB

Up to three years from due date of submission/date of drawdown

INR 50,000 per year

Form ECB 2 / Form ECB

Beyond three years from due date of submission/date of drawdown

INR 100,000 per year


[1] The New Regulation has repealed the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 and Foreign Exchange Management (Borrowing and Lending in Indian Rupees) Regulations, 2000 (erstwhile Regulations).

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