Sagus Speaks October 2025 | Part I

This Newsletter covers key Regulatory & Policy Updates, Government Notifications and Judicial Pronouncements.

REGULATORY AND POLICY UPDATES

RBI notifies Draft Foreign Exchange Management (Borrowing and Lending) (Fourth Amendment) Regulations, 2025.

The Reserve Bank of India ("RBI"), by way of notification dated 03.10.2025, issued the draft Foreign Exchange Management (Borrowing and Lending) (Fourth Amendment) Regulations, 2025 ("Draft FEM Amendment Regulations")¹ to the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 ("Principal Regulations"). The Draft FEM Amendment Regulations are available on the RBI website for inviting comments and suggestions from stakeholders until 24.10.2025.

The Draft FEM Amendment Regulations proposes to bring the following changes:

1. Eligible Borrowers and Lenders: The Draft FEM Amendment Regulations proposes to expand the scope of eligible borrowers to include entities registered in India (excluding individuals) and allow even companies in insolvency or restructuring to raise External Commercial Borrowings ("ECBs") if their resolution plan explicitly provides for the same. It also proposes to expand the recognized lender pool to include overseas entities, Indian banks' foreign branches, and International Financial Services Centre entities regulated by RBI. Currently, only certain entities such as Indian companies and limited liability partnerships (LLPs) could access ECBs.
2. Restriction on End-Use of Borrowed Funds: The Draft FEM Amendment Regulations proposes to insert a specific provision Regulation 3A, which now expands restrictions by also prohibiting on-lending except by regulated entities and corporates lending to their group entities. Additionally, it bars transactions in listed or unlisted securities except as specifically permitted under the Overseas Investment framework, corporate transactions in compliance with the Companies Act, 2013, SEBI (SAST) Regulations, 2011, the Insolvency and Bankruptcy Code, 2016, and investment in primary market instruments by non-financial entities solely for on-lending purposes. Currently, ECB end-use restrictions specified that borrowed funds could not be used for activities such as engaging in the business of chit fund or Nidhi Company, investment in capital markets including margin trading and derivatives, agricultural or plantation activities, real estate activity or construction of farmhouses, and trading in Transferrable Development Rights ("TDR")
3. Borrowing Limits and Link to Net Worth: The Draft Amendments proposes that an eligible borrower may raise ECB to the higher of: (a) outstanding ECB up to USD 1 billion; or (b) total outstanding borrowing (including both external and domestic borrowing) up to 300 per cent of net worth as per the last audited balance sheet. Regulated financial sector entities are exempt from this revised cap. Currently, eligible borrowers or eligible categories of borrowers could raise ECBs up to USD 750 million or equivalent per financial year, while Startups were limited to USD 3 million or equivalent per financial year.
4. Minimum Average Maturity Period ("MAMP"): The Draft FEM Amendment Regulations proposes to allow manufacturers to borrow for 1 (one) year, up to USD 50 million, while maintaining the usual 3 (three) years minimum period for other sectors. Currently, a standard MAMP (usually three years or more) is mandatory for all ECBs.

SEBI revises the Block Deal Framework for stock exchanges.

The Securities and Exchange Board of India ("SEBI") by way of Circular No. SEBI/HO/MRD/PODIII/CIR/P/2025/134 dated 08.10.2025 ("Block Deal Circular")², has revised the Block Deal Framework for stock exchanges.

SEBI has revised the Block Deal Framework, establishing two distinct trading windows with specific operational parameters, namely, the 'Morning Block Deal Window' which will operate between 08:45 AM to 09:00 AM, with trades executed at the previous day's closing price as the reference price; and the 'Afternoon Block Deal Window' which will operate between 02:05 PM to 02:20 PM, with the reference price being the volume weighted average market price ("VWAP") calculated from trades executed between 01:45 PM to 02:00 PM in the cash segment.

The orders must be placed within +3% of the applicable reference price in respective windows, subject to surveillance measures and price bands. The minimum order size has been set at INR 25 crores (Indian Rupees Twenty-Five Crores) for execution of trades in block deal windows. All trades executed in block deal windows must result in delivery and cannot be squared off or reversed. The stock exchanges are required to disseminate information on block deals (including scrip name, client name, quantity, and traded price) to the public on the same day after market hours. These provisions will also apply to the block deal window under the optional T+0 settlement cycle.

The Block Deal Circular will be applicable from the 60th day of issuance, i.e., from 07.12.2025.

SEBI introduces relaxations in the minimum information requirements for Related Party Transactions.

SEBI, by way of Circular No. SEBI/HO/CFD/CFD-PoD2/P/CIR/2025/135 dated 13.10.2025 ("RPT Circular")³ , has introduced relaxations in the minimum information requirements for Related Party Transactions ("RPTs") to facilitate ease of doing business for listed entities. The Circular comes into effect immediately, i.e., from 13.10.2025.

SEBI has introduced relaxations for RPT disclosures, whereby listed entities which were required to provide detailed information as per the circular on "Minimum information to be provided to the Audit Committee and Shareholders for approval of Related Party Transactions" ("RPT Industry Standards") formulated by Industry Standards Forum ("ISF"), will now be required to comply with the guidelines only for material transactions above the threshold. As per the RPT Circular, RPTs not exceeding 1% of annual consolidated turnover or INR 10 crores (Indian Rupees Ten Crores), (whichever is lower) may comply with simplified disclosure requirements under Annexure13A of the Circular, and transactions below INR 1 crore (Indian Rupees One Crore) are exempt from these minimum information requirements altogether. These relaxations apply to both Audit Committee approvals and shareholder approvals.

Footnotes

1 Draft Foreign Exchange Management (Borrowing and Lending) (Fourth Amendment) Regulations, 2025.

2 SEBI Circular on Review Block Deal Framework

3 SEBI Circular relaxes minimum information requirements for related party transactions.

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