2026-02-17 02:47:00
India’s ECB rule changes widen offshore funding options for corporates, with a mild positive read-through for risk.
Info via Reuters reporting.
Summary:
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RBI finalised easier rules for external commercial borrowings (ECBs), expanding flexibility for corporates raising overseas debt.
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Eligible firms can borrow up to $1bn or 300% of net worth, in foreign currency or rupees.
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Pricing constraints eased, with borrowing costs to be aligned with market conditions.
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Minimum average maturity set at three years; refinancing of existing borrowings permitted.
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End-use restrictions remain in place for some purposes, including parts of real estate, unless structured within rules.
India’s central bank has finalised a set of reforms that make it easier for companies to raise debt offshore, a move likely to broaden funding options for corporates and lower financing frictions as investment and refinancing needs remain elevated.
Under the updated framework, eligible borrowers will be able to raise external commercial borrowings of up to $1 billion or 300% of their net worth, with funding permitted in either foreign currency or Indian rupees. The rules also loosen earlier constraints around borrowing costs, allowing firms to raise foreign debt at market pricing rather than being bound by more restrictive cost ceilings.
The central bank has retained basic safeguards, including a minimum average maturity requirement of three years. It has also explicitly allowed ECB proceeds to be used to refinance existing borrowings, a change that may be particularly relevant for firms facing near-term maturity walls or seeking to optimise funding mixes between domestic and offshore markets. In addition, ECBs may be converted into non-debt instruments, subject to compliance with foreign exchange regulations.
The reforms are likely to be welcomed by larger corporates with established access to international markets, as well as by issuers that can arbitrage between onshore and offshore rates depending on currency basis, swap costs and market windows. At the same time, the central bank has kept some end-use restrictions, including limitations linked to real estate activity unless transactions are structured in line with the rulebook. That suggests policymakers are still aiming to prevent speculative leverage while improving legitimate corporate funding channels.
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Stock market implications are broadly constructive at the margin. Sectors with sizable capex plans or refinancing needs could benefit from a wider set of funding options and potentially lower blended borrowing costs. Companies with strong credit profiles may be best positioned to take advantage of market-priced offshore funding. Financials could see a mixed effect: easier offshore access might reduce incremental domestic loan demand for some top-tier borrowers, but it can also support credit quality by easing refinancing risk and reducing stress for leveraged balance sheets. In macro terms, greater offshore borrowing could influence FX flows and INR hedging demand, particularly if issuance rises in foreign currency, making currency management and hedging costs an important swing factor for corporates.
