RBI Notifies The Foreign Exchange Management (Borrowing And Lending) (First Amendment) Regulations, 2026

The Reserve Bank of India ("RBI"), through notification dated 09.02.2026, and published on 16.02.2026, notified the Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026 ("FEMA Amendment Regulations 2026")¹ to amend the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 ("FEMA Regulations 2018"). The FEMA Amendment Regulations 2026 have come into effect from the date of its publication in the official gazette i.e., 16.02.2026.

The salient features of the FEMA Amendment Regulations 2026 are as follows:

1. Amendment of Regulation 6(B): FEMA Amendment Regulations 2026 specifically substitute sub-regulation (vi) of Regulation 6B dealing with borrowing by a resident individual in INR from a non-resident Indian or relative who is an overseas citizen of India cardholder, to clarify and expand that: (a) the amount of the loan must be received either by inward remittance from outside India or by debit to the lender's NRE, NRO, FCNR(B) or SNRR account, and (b) the borrowing shall be on a non-repatriation basis, with both interest and principal to be repaid only to the NRO account of the lender.
2. Insertion of Regulation 3A for Restriction on end-use of borrowed funds: The FEMA Amendment Regulations 2026 insert Regulation 3A, titled 'Restriction on end-use of borrowed funds', which shall apply to funds borrowed in terms of FEMA Regulations 2018. Under Regulation 3A(1), such funds shall not be utilised in India for: (a) chit funds, (b) Nidhi companies, (c) real estate business and construction of farmhouses (subject to specified conditions for constructiondevelopment projects and industrial parks), (d) agricultural and animal husbandry, except specified categories and services, (e) plantation, except tea, coffee, rubber, cardamom, palm oil tree and olive oil tree, (f) trading in Transferable Development Rights, (g) transacting in listed/unlisted securities except for transactions undertaken by an Indian entity for corporate actions such as merger, demerger, amalgamation, arrangement, or acquisition of control, undertaken under applicable laws, (h) repayment of a domestic INR loan which was availed for a restricted end-use or is classified as a non-performing asset, and (i) on-lending for any of the purposes for which funds cannot be borrowed and utilised under Regulation 3A.
3. Substitution of Schedule I - External Commercial Borrowing Framework:
   
   1. Eligible borrowers: Any person who is a resident of India (other than an individual), incorporated, established or registered under a Central or State Act, is eligible to raise Exchange Commercial Borrowing ("ECB"), subject to the applicable laws. Borrowers undergoing restructuring or CIRP may raise ECB only if permitted under the relevant plan. Borrowers with pending investigations, adjudication or appeal under the Foreign Exchange Management Act, 1999 may raise ECB subject to disclosure under Form ECB 1, without prejudice to the outcome of such investigation, adjudication or appeal.
   2. Recognised lenders: Eligible borrowers may raise ECB from (a) a person resident outside India, (b) a branch outside India of an entity whose lending business is regulated by RBI, and (c) a financial institution or its branch set up in an International Financial Services Centre.
   3. Currency of borrowing: ECB may be raised in foreign currency or INR and the currency may be changed subject to the exchange rate prevailing on the date of agreement or any rate that does not result in higher liability.
   4. Forms of borrowing: ECB may now be raised through any commercial borrowing arrangement involving repayment of principal with agreed interest and includes borrowings through issuance of Foreign Currency Convertible Bonds and Foreign Currency Exchangeable Bonds. Funds received from a person resident outside India on or after 30.04.2007 against preference shares or debentures that are not fully and mandatorily convertible into equity shares will be treated as ECB. Funds will not be treated as ECB if they constitute trade credit with maturity of up to three years, export advances, investments received, investments through convertible notes, or debt investments from a Foreign Venture Capital Investor under the specified rules
   5. Borrowing limits: Eligible borrowers may raise ECB up to the higher of (a) outstanding ECB up to USD 1 billion; or (b) total outstanding borrowing up to 300% of net worth based on the last audited standalone balance sheet. The borrowing limit does not apply to borrowers regulated by financial sector regulators.
   6. Maturity: ECB shall have a minimum average maturity period ("MAMP") of three years. Manufacturing sector borrowers may raise ECB with maturity between one and three years subject to a cap of USD 150 million. The MAMP requirement shall not apply in specified cases such as conversion into or repayment by non-debt instruments, refinancing, waiver of debt or repayment for corporate actions. ECB with maturity below three years shall comply with the cost ceiling prescribed for trade credit. Furthermoe, call and put options, if any, shall not be exercisable prior to completion of MAMP.
   7. Detailed provisions on Receipt and Utilisation of Proceeds, Security and Guarantees, Refinancing, Conversion into Non-Debt Instruments, Changes in Terms, Debt Servicing, and Reporting and Classification Of 'Untraceable Borrowers' as applicable, have now been clearly provided.

Footnote

1. Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026

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