Liberalization move: RBI’s overhaul of its rules for borrowing from abroad opens up greater access to global capital

After years of marginal tweaks, the Reserve Bank of India (RBI) undertook one of the most consequential reforms in its External Commercial Borrowing (ECB) framework in February this year. Over the decades, commercial loans raised by Indian resident entities have been regulated under tightly-controlled regimes, with caps on the quantum of annual borrowing, ceilings on interest spreads, prescriptive maturity conditions and rigid end-use norms.

The new framework, which raises borrowing limits and removes the all-in cost ceiling, represents a structural shift towards a calibrated and market-driven approach.ECBs are an important source of funding for Indian corporates. According to RBI data, outstanding ECBs stood at $190.4 billion as of September 2024, marginally higher than in June and March 2024.Of this, about $155 billion comprised non-rupee and non-foreign direct investment-related components.

The private sector accounted for roughly 63% of outstanding ECBs (amounting to about $97.6 billion), with public sector entities making up the remaining 37% (about $55.5 billion). Insofar as new ECB registrations are concerned, these rose sharply to $49.2 billion in 2023-24 from $26.6 billion in 2022-23, even though these still stood slightly below the $52.9 billion recorded in 2019-20 during the era of ultra-low global interest rates.

In 2024-25 (up to November 2024), ECB registrations had already reached $33.8 billion.Despite the increase in absolute flows, ECB and foreign currency convertible bond registrations as a share of gross domestic product (GDP) have declined—from 1.9% in 2019-20 to about 1.2% in 2023-24. Similarly, outstanding ECBs as a percentage of GDP have moderated from 5.7% to 4.9% over the same period.The