MUMBAI: With the Reserve Bank drastically liberalizing the external commercial borrowing (ECB) norms, investment bankers are expecting corporates to rush to this fundraising route, which could nearly double to $100 billion next fiscal, from the record $61.2 billion raised last fiscal.
Key changes that the central bank announced earlier this week include higher per-borrower limits of up to $1 billion from $750 million earlier, relaxed end-use permissions, and the removal of pricing restrictions, making overseas funding more attractive for corporates to fund their capital needs for a variety of activities.
The ECB market could nearly double next fiscal from $61.2 billion last fiscal and cross the $100-billion mark, two i-bankers who did not want to be quoted told TNIE.
The revised framework widens the pool of eligible borrowers and recognised lenders, raises borrowing limits, relaxes maturity restrictions, and removes the cap on the all-in-cost for certain ECB categories. The changes are aimed at making the regime more flexible and aligned with evolving global funding conditions.
The RBI has increased the borrower limit to $1 billion or 300% of their net worth, from $750 million earlier, creating additional headroom for large companies which had previously exhausted their limits.
“With the borrower limit being raised to $1 billion along with the removal of the pricing cap and wider end-use permissions, ECB volumes could even double from current levels over the next few years to cross $100 billion,” Utsav Johri, a partner at JSA Advocates & Solicitors said.
“The new norms should lead to an increase in volume and issuances, but one has to also factor in variables such as hedging cost. From a diversification of funding perspective, it is always good to expand the types of funding,” said Karan Gupta, a director and head of financial institutions at India Ratings, in a note but did not quantify how much the would-be target could.
RBI data show that total ECBs raised between April and December 2025 stood at $27.5 billion, while the total ECB raised last fiscal stood at $61.2 billion. It was $49 billion in fiscal 2024, $26.6 billion in FY23, $39.8 billion in FY22, $35.2 billion in FY21 and $52.9 billion in FY20, according to RBI data.
Companies, including non-banks, filed proposals with the central bank to raise $4.43 billion through ECB and foreign currency convertible bonds in December 2025, the highest amount recorded so far this financial year. The leading ones include Indian Railway Finance Corporation, which seeks to raise $299.5 million for infrastructure bonds.
“The new ECB norms are largely an opening-up exercise by the RBI. Earlier, the end-use of funds was restricted to specific activities, but now the framework allows for a wider set of applications, which is a positive move. This should support higher volumes and potentially lead to an increase in the number of issuances,” said Umesh Revankar, executive vice-chairman of Shriram Finance, which heavily uses the ECB route.
“That said, the actual uptake will depend on market appetite and overall liquidity conditions. At present, onshore liquidity is comfortable, so companies may tap overseas markets mainly if they are looking to scale up significantly or access larger pools of capital,” he added.
“The new ECB norms are a game-changer. This is the ‘1991 moment’ for M&As and credit markets as it gives birth to a new LBO (leveraged buyout) market in the country, bringing the country on a par with the US, England, and others. Under the new regulations, ECBs can be raised for acquisition finance,” said Ashwin Bishnoi, a partner at Khaitan & Co.
Analysts also see the move deepening integration between domestic corporates and global capital markets, diversify funding sources, and reduce pressure on domestic liquidity. However, they cautioned that currency risk and global rate volatility will remain key considerations for borrowers.
The RBI has also scrapped the all-in-cost ceiling for ECBs with average maturity of three years and above. Earlier, the pricing was capped at 450 bps over the secured overnight financing rate (SOFR). Fully-hedged ECBs currently cost about 9.5-10.5%, assuming a 3.5% SOFR base, a 450 bps spread cap and an additional 2-3% hedging cost.
As against this, even an AAA or AA-rated issuer can raise domestic funds at 7-8.5% only, making onshore borrowing 100-300 bps cheaper for top-rated names.
With the ceiling removed, pricing is now market-linked allowing lenders and borrowers to negotiate spreads based on credit profile, structure and tenure.
By broadening eligibility, relaxing end-use restrictions and removing pricing caps, the new guidelines increase access to global liquidity pools, said Chetan Joshi, head of debt financing at HSBC India.
Also, the enhanced flexibility around tenor, quantum, end-use, pricing and prepayment materially expands the sources of funding available to domestic corporates. This is likely to provide significant impetus to forex borrowing and the market is well-positioned for sustained growth, he added.
With the central bank also liberalizing the end-use norms, companies can now use ECB proceeds for acquisition financing or to refinance domestic loans and for broader corporate purposes, beyond traditional capex.
Marketmen are also expecting the reduction in minimum average maturity to three years from seven-ten years for several categories to make refinancing of rupee loans more practical.
Acquisition finance, which is priced higher due to increased risk, is expected to see stronger demand. With no regulatory ceiling, pricing can now depend on the transaction structure, whether bullet, balloon or amortising and underlying credit profile, said Johri.
Borrowers could also use the Gift City route to bring down the cost, with no withholding tax, which could lower the effective borrowing cost compared to onshore debt and NCDs issued to FPIs.
The RBI has also extended the relaxations to real estate as well. ECBs are now permitted for construction and development activities in certain sectors where foreign direct investment is allowed, including industrial and commercial projects.
While uptake will depend on pricing and hedging costs, this provides additional funding options for developers, Johri said.
For manufacturing companies, the borrowing limit for short-term trade credit has been raised to $150 million from $50 million for maturities of one-three years, with pricing aligned to trade credit norms currently capped at 350 bps over the SOFR for forex trade credit.
However, the RBI has retained the curbs on chit funds, Nidhi companies, farmhouses or general real estates from using the ECB route. Also, use in agriculture and animal husbandry is largely restricted.