India's External Commercial Borrowings Regime Simplified

The Reserve Bank of India (the "RBI") has revised the external commercial borrowings ("ECB") framework on a regular basis in a bid to make foreign borrowings a lucrative method of raising capital. On December 17, 2018, the RBI replaced the erstwhile regulations on ECBs and notified the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018. These regulations put in place a new and simplified framework for Indian entities to borrow monies from foreign lenders. Thereafter, on January 16, 2019, the RBI issued a circular with more details on the new ECB framework.

In our view, the new framework has significantly simplified the ECB regime by introducing uniform requirements for all ECBs, which was not the case under the erstwhile regime. Moreover, the services sector stands to benefit greatly from the new framework as they can avail short-term ECBs.