Ask most finance teams — and most NRI promoters funding an Indian group company from abroad — how External Commercial Borrowings work, and you will hear the same three claims. That the all-in-cost is hard-capped at benchmark plus 500 basis points. That the borrowing limit is USD 750 million a year. And that a loan from an individual NRI lender needs a trip to the RBI's approval route. All three were true under the March 2019 Master Direction. None of them are true today.

The Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026, dated 9 February 2026 and gazetted on 16 February 2026, supersede the operative provisions of the 2019 Master Direction on External Commercial Borrowings, Trade Credits and Structured Obligations. The shift is not cosmetic. India has moved from a prescriptive ECB regime — where the regulator specified your ceiling rate, your permitted lender, and your permitted end-use in detail — to a principle-based one, where pricing is left to the market and the guardrails sit on tenor, purpose and reporting instead.

If you are an NRI who has lent to, or is planning to lend to, an Indian company, this changes what is available to you and what your Indian borrower must file.

What the law actually says

The all-in-cost ceiling is gone. Under the 2019 framework, ECB pricing was capped at the benchmark rate plus 500 basis points, and any arrangement fee, guarantee fee or prepayment charge had to be squeezed inside that number. The 2026 Amendment Regulations remove the rigid all-in-cost cap. Pricing is now negotiated between borrower and lender on commercial terms. The regulatory logic is that a hard cap was pushing genuine private-credit transactions offshore or into structures that had to be engineered around the ceiling; removing it lets the borrowing be priced honestly.

The quantum limit is now a dual test. In place of the old annual USD 750 million automatic-route cap, an eligible borrower may raise up to USD 1 billion or 300% of its net worth, whichever the framework permits on the facts. Net worth is read off the borrower's audited balance sheet, so a company with a thin net worth no longer gets an artificially generous headline limit it could never service — and a well-capitalised company is no longer boxed in by a flat dollar ceiling that ignored its size.

Recognised lender has been widened to include individuals. This is the change most relevant to NRI readers. Under the amended framework, any person resident outside India is a recognised lender. That means an NRI individual — resident in the UAE, the US, Germany, Singapore, anywhere — can lend directly to an eligible Indian borrower under the automatic route, without the earlier requirement that the lender be a resident of a FATF or IOSCO compliant jurisdiction acting through a recognised financial institution channel. The equity-holder and foreign-branch carve-outs that NRI promoters used to rely on are now largely redundant.

Refinancing is no longer trapped by the old rate. Previously an existing ECB could only be refinanced if the all-in-cost of the new borrowing was lower than that of the old one. That condition has been deleted. A borrower may refinance on whatever terms are commercially sensible, provided the Minimum Average Maturity Period (MAMP) of the original ECB is preserved. In practice this means you cannot use a refinancing to shorten the money's stay in India, but you can restructure the pricing.

MAMP and end-use restrictions survive. The liberalisation is on price and lender identity, not on tenor or purpose. The minimum average maturity discipline continues, and ECB proceeds still cannot be used for the historically prohibited purposes — on-lending outside permitted categories, real-estate speculation, capital-market investment, and acquisition of land. If your intended use falls in that list, the 2026 relaxations do not help you.

Reporting has been retooled, not relaxed. RBI has issued revised ECB reporting forms with immediate effect from the date of issuance. Borrowers, lenders and Authorised Dealer Category-I banks are all on the amended reporting framework. The Loan Registration Number remains the gating item — no LRN, no drawdown — and monthly returns continue.

On the tax side, nothing in the FEMA amendment changes the Income Tax Act 2025 treatment. Interest paid by an Indian borrower to a non-resident lender is Indian-source income, and withholding applies. The remittance still runs through Form 145 (the erstwhile Form 15CA) and, where a chartered accountant's certificate is required, Form 146 (the erstwhile Form 15CB). Credits appear in the lender's Form 168 (the erstwhile Form 26AS). And because ITA 2025 speaks in Tax Years rather than "previous year" and "assessment year", the interest is assessed in the Tax Year of accrual or receipt as the case may be.

Practical implications for NRIs

Scenario one — the NRI promoter funding his own Indian company. Rohit, resident in Dubai, holds 40% of an Indian manufacturing private limited with a net worth of Rs.60 crore. He wants to put in USD 3 million as debt rather than equity, to keep his shareholding constant and take interest out rather than dividends. Under the old framework, an individual lender was a problem; he would have routed it through an offshore entity or converted it to equity. Under the 2026 framework he is a recognised lender in his own right. His company's ceiling on the 300%-of-net-worth test is roughly Rs.180 crore, so USD 3 million is comfortably inside. He negotiates the rate on arm's-length terms — there is no ceiling forcing an artificial number — and the company deducts tax at source on the interest and remits through Form 145.

Scenario two — refinancing an expensive 2023 ECB. An Indian company raised a USD 20 million ECB in 2023 at a punitive spread when credit was tight. Rates have moved. Under the old rule, refinancing was only permitted if the new all-in-cost was lower, which sounds helpful until you realise it blocked restructurings that lowered total cost through a different fee structure but showed a nominally higher coupon. That test is gone. The company can refinance, provided the MAMP of the original facility is respected — it cannot use the refinancing to pull the money out of India early.

Scenario three — the NRI who assumes the interest is tax-free abroad. This is where readers get hurt. Removing the all-in-cost ceiling makes the loan more attractive commercially, but the interest remains taxable in India at source. The Indian company must withhold. Whether the applicable DTAA reduces that rate depends on the lender's treaty position, and claiming the treaty rate requires a valid Tax Residency Certificate plus Form 10F filed online. A higher negotiated coupon under the new framework simply means a larger withholding base — plan the net-of-tax yield, not the headline coupon.

Scenario four — the small company that mistakes liberalisation for exemption. A company with a net worth of Rs.4 crore now has a 300%-of-net-worth headroom of roughly Rs.12 crore, not USD 1 billion. The dual test is a ceiling, not a menu of alternatives you pick from freely. Read your audited balance sheet before you sign a term sheet.

Step-by-step: what to do

Confirm the borrower is an eligible entity under the amended Regulations, and pull the latest audited balance sheet to compute net worth. Fix your ceiling on the dual test before negotiating quantum.
Confirm the end-use is permitted. If the money is going into land, real-estate speculation, capital markets, or on-lending outside permitted categories, stop — pricing liberalisation does not cure a prohibited end-use.
Fix the MAMP appropriate to the facility and write it into the loan agreement. If this is a refinancing, carry the original MAMP forward; that is now the binding constraint.
Negotiate pricing commercially and document how the rate was arrived at. With no regulatory ceiling, transfer-pricing and arm's-length scrutiny becomes the live risk on a related-party loan — keep a defensible file.
Route the application through your AD Category-I bank and obtain the Loan Registration Number before any drawdown. Use the revised reporting forms; the older formats are superseded.
Set up withholding at the Indian company before the first interest payment. Where the lender claims a treaty rate, collect the Tax Residency Certificate and file Form 10F online in advance — not in the week the payment is due.
File Form 145 for each remittance, with Form 146 certification where required, and reconcile against Form 168 at the lender's end each Tax Year.
Maintain the monthly ECB return through the AD bank for the life of the facility. Reporting lapses are the most common trigger for a compounding application later.

FAQ

Can an NRI individual now lend to an Indian company without RBI approval?
Yes, under the automatic route, provided the borrower is an eligible entity, the end-use is permitted, MAMP is respected and the facility is within the dual quantum ceiling. The 2026 amendment recognises any person resident outside India as a recognised lender. The AD bank still processes it and the LRN is still mandatory.

Does removing the all-in-cost ceiling mean I can charge any rate I want on a loan to my own company?
Regulatorily, pricing is now market-determined. But a loan from a promoter to his own company is a related-party transaction, and Indian transfer-pricing rules require the rate to be at arm's length. The FEMA cap is gone; the tax test is not. Document a comparable.

Is the interest I receive as an NRI lender taxable in India?
Yes. It is Indian-source income and the payer withholds tax. A DTAA may reduce the applicable rate, but only if you hold a valid Tax Residency Certificate and have filed Form 10F online. Track the credits in Form 168 (the erstwhile Form 26AS) and reconcile before filing.

We took an ECB in 2023 at a high rate. Can we refinance now?
Yes. The requirement that the new all-in-cost be lower than the old has been removed. The condition that survives is the MAMP of the original facility — the refinancing cannot shorten the effective maturity of the original borrowing.

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