FEMA Borrowing & Lending Regulations 2018 vs Draft Amendment 2025

Provision	ECB 2018	Draft ECB 2025 Amendment
1. Eligible borrowers	A person resident in India (other than an individual) incorporated, established or registered under a Central Act or State Act may raise ECB, subject to the condition that it is permitted to borrow in terms of the applicable laws.	Clarifies- (1) An eligible borrower under a restructuring scheme or CIRP may raise ECB only if plan permits. (2) An eligible borrower under pending investigation/adjudication/appeal may raise ECB, must disclose to designated AD, which informs agencies.
2. Recognised lenders	An eligible borrower may raise ECB from: - A person resident outside India; - A branch outside India or in IFSC of entity whose lending business is regulated by RBI.	No major change; includes branches in IFSC and regulated lenders
3. Currency of borrowing	(1) FCY or INR; conversion subject to RBI approval.	(1) FCY or INR (2) Currency may be changed FCY↔FCY, FCY↔INR, INR↔FCY (3) Change at agreement date rate or lower liability
4. Forms of borrowing	ECB includes FCCB, FCEB; certain trade credit/external funds excluded.	Clarifies explicitly: - Trade credit up to 3 years - Export advance - Investments via Debt Instruments (2019) or Convertible Notes (2019) not treated as ECB
5. Borrowing limit	USD 750 mn.	(1) Up to USD 1 billion or 300% of net worth (2) Proposed ECB considered while checking limits (3) Not applicable to RBI-regulated entities
6. Maturity	MAMP 3 years; 1–3 years for manufacturing ECB < USD 50 mn.	Same MAMP rules; clarifies exceptions: - Conversion to non-debt instruments - Repayment via non-debt proceeds - Lender/borrower closure/merger/resolution
7. Cost of borrowing	Market-related; AD/RBI approval.	Adds explicit definition: - Includes interest, fees, charges, guarantee fees, export credit agency charges - Excludes commitment fees/statutory taxes - ECB proceeds cannot pay cost of borrowing
8. Other costs	Prepayment/penal interest per RBI guidelines.	Clarified “subject to satisfaction of AD Category I bank”
9. Arm’s length principle	Implicit	Explicitly required for related-party ECBs
10. Drawdown	RBI approval, funds to INR account.	Expanded: - LRN mandatory - ECB proceeds repatriated & credited to INR account - Pending utilisation can be placed in fixed deposits (max 12 months) or invested abroad in high-quality instruments - Foreign currency expenditure can use FCY account in India or outside India
11. Securing the borrowing	Allowed via charge/guarantee; subject to RBI guidelines.	Expanded: - Charge on movable/immovable/intangible assets, co-terminus with ECB - NOC from existing lenders - Enforcement restricted to outstanding ECB - RBI-regulated entities cannot issue guarantees - Movable assets may be taken abroad with NOC - Transfers upon enforcement follow Act/Rules
12. Refinancing	Allowed per RBI limits.	Explicit condition: Refinancing must maintain MAMP and not increase credit spread beyond original ECB
13. Conversion to non-debt instrument	Allowed under FEM (Non-Debt Instruments) Rules.	Detailed: - No additional costs to lender - Lender and other creditor consent - Exchange rate treatment clarified - Prudential regulations apply if RBI-regulated facilities exist
14. Change of parameters, terms, conditions	Allowed with lender consent & RBI approval.	More structured: - FCCB/FCEB conversion requires RBI approval - Extension of tenor follows RBI prudential rules - Change of designated AD requires NOC from existing AD
15. Debt servicing	Principal, interest remittance allowed.	Adds: - Repayment via NRO account must be credited to NRO account only
16. Reporting	Form ECB, ECB-2; timely reporting.	Expanded: - Form ECB for LRN - Form ECB-2 for drawdown/debt servicing - Revised Form ECB for changes - Late fee applicable for non-compliance
17.On-lending restrictions	Limited / as per RBI circulars.	Explicit prohibitions except to regulated lenders or group entities; must not violate end-use restrictions
18.Cross-border Rupee lending	Not explicitly permitted.	AD Category I banks may lend in INR to Bhutan, Nepal, Sri Lanka for cross-border trade
19.End-use restrictions	Implicit in circulars.	Explicit in regulation 3A: - Chit fund / Nidhi company - Agricultural/plantation (except FDI-permitted) - Real estate / farmhouses (except FDI-permitted and industrial land) - TDR trading - On-lending (limited to regulated lenders or group entities) - Securities trading (exceptions for primary market, mergers, non-debt instruments)
20.Definitions	Basic definitions of ECB, ECL, AD, etc.	Included definitions for: - Benchmark rate - Cost of borrowing - Designated AD Category I bank - EEFC account, NRE/NRO accounts, RFC account - Group entity - Trade credit, FCEB, FCCB - Infrastructure sector, IFSC - Net worth calculation for non-company entities - Clarified “arm’s length basis”