In a major policy move, the Reserve Bank of India (RBI) has removed the $750 million cap on External Commercial Borrowings (ECBs) for non-banking financial companies (NBFCs), allowing them to raise over $1 billion or more from overseas markets. The relaxation, part of the October 2025 monetary policy, is expected to ease funding constraints, diversify capital sources, and improve foreign capital access for regulated entities.
Core Development
RBI lifted the borrowing cap for NBFCs and eased end-use restrictions.
Corporates can now borrow up to $1 billion or 300% of net worth, whichever is higher.
Borrowing rates will be market-determined instead of preset spreads.
Repayment flexibility increased — minimum maturity of 3 years (1–3 years for manufacturing).
Borrowers under debt restructuring or insolvency can raise ECBs if approved under resolution plans.
Conversion of ECBs into non-debt instruments like equity is permitted.
Key Drivers / Issues
Aimed at boosting liquidity and credit flow to the real economy.
Reduces dependency on domestic banks and bond markets for NBFCs.
Supports India’s goal of integrating with global capital markets.
Encourages longer-term foreign participation in Indian credit.
Stakeholder Impact
For NBFCs, this provides greater flexibility to manage balance sheets and fund growth sectors. Corporates gain improved access to global debt markets. Investors benefit from diversified credit exposure, while regulators maintain oversight through prudential norms.
Industry & Policy Reactions
Analysts welcomed the move, calling it a “calibrated liberalisation” that aligns India’s foreign borrowing regime with international standards. Industry bodies said it could lower borrowing costs for top-rated NBFCs and enhance capital efficiency.
Challenges Ahead
Managing currency and interest rate risks from foreign exposure.
Preventing over-leveraging among smaller NBFCs.
Ensuring prudential monitoring under evolving global financial conditions.
Strategic Outlook
The RBI’s liberalised ECB framework marks a structural shift in external financing policy. It strengthens India’s position as a trusted capital destination, offering NBFCs room for expansion while maintaining regulatory guardrails.
Why This Matters
By unshackling ECB limits, the RBI is unlocking global capital flows for India’s financial sector — a timely move as credit demand accelerates and NBFCs seek diversified funding sources.
