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RBI Draft ECB Framework: Net-Worth Limits, No Cost Cap

6 October 20251 min read
BANKING & FINANCERBI Draft ECBFramework:Net-Worth Limits,No Cost Cap6 October 2025safalsetu.com

Why in the news

RBI released a draft to reform external commercial borrowing, widening access to overseas funds while managing risk.

Key facts

  • Limit: higher of $1 billion outstanding ECBs, or total borrowings up to 300% of net worth.
  • Cost ceiling of 450 bps over benchmark goes; pricing follows the market.
  • Looser end-use and MAM norms help infrastructure and capital-heavy sectors.
  • More eligible borrowers and lenders would be allowed.

Handling of proceeds

CaseRule
Funds raisedRepatriate at once to an INR account in India
Awaiting useFixed deposits up to 12 months
Foreign-currency spendingForeign currency accounts in India or high-quality overseas deposits
Restructuring or insolvencyOnly if the resolution plan permits

Exam angle

  • MAM: minimum average maturity.
  • Figures: $1 billion, 300%, 450 bps, 12 months.

Test yourself

1. In RBI's draft ECB framework, borrowing is allowed up to what share of net worth, as an alternative to $1 billion of outstanding ECBs?

Limit is the higher of $1 billion outstanding ECBs or borrowings up to 300% of net worth.

2. Which existing ECB feature does RBI's draft propose to remove, at present set at 450 bps over benchmark?

The all-in-cost ceiling of 450 bps would go and pricing would follow the market.

3. Under the draft, for how long can ECB proceeds awaiting deployment be held in fixed deposits?

Pending use, funds can be held in fixed deposits for up to 12 months.

This topic is part of Daily Current Affairs 4 October 2025 (15 topics).

All topics of the dayDay quizOctober 2025

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