ECB Compliance: ECB-2 Reporting and RBI Rules for Indian Borrowers
If your company or LLP has borrowed from a lender outside India, ECB compliance starts before the money arrives and carries on until the last repayment. Since 16 February 2026, Form ECB-2 is event-based, not monthly. We prepare the data and coordinate with your AD bank.
What it is
An external commercial borrowing, or ECB, is a loan an Indian company or LLP takes from a lender resident outside India. The lender could be a foreign bank, an overseas group company or an IFSC institution. RBI watches these loans closely because the money crosses the border.
The rules come from the Foreign Exchange Management Act, 1999 and the FEM (Borrowing and Lending) Regulations, 2018, as changed by the first amendment effective 16 February 2026. ECB compliance means three things: borrowing within the permitted limits, registering the loan through your Authorised Dealer (AD) bank, and reporting every event on Form ECB-2. Our FEMA compliance page covers the other RBI filings, and FC-GPR filing covers equity from foreign investors.
Who it applies to
Companies borrowing abroad
Say a Faridabad auto-parts manufacturer signs a dollar loan with an overseas bank to buy machinery. That is an ECB, and the framework applies from day one.
LLPs
The 2026 amendment expressly makes LLPs eligible borrowers. An LLP that was waiting on this change can now plan an ECB with its AD bank.
Existing ECB borrowers
If you already have an ECB outstanding, the move from monthly to event-based ECB-2 changes how your finance team reports. Old habits need updating.
Why it matters
Keeps your loan legal
A loan that skips registration or breaches the framework is a FEMA contravention, even if the money was used well.
Protects future borrowing
AD banks and RBI look at your reporting record. Clean ECB-2 filings make the next drawdown or refinancing easier.
Avoids late fees
A missed ECB-2 means a late submission fee and, in bad cases, FEMA proceedings. Filing on time costs nothing extra.
Documents required
Loan papers
- Signed loan agreement or term sheet with lender details
- Lender KYC and proof that the lender is eligible
- Board resolution approving the borrowing
- Drawdown and repayment schedule
About the borrower
- Certificate of incorporation or LLP registration, with PAN
- Latest audited balance sheet for net worth and limit calculation
- Declaration of end-use and borrower eligibility
- Details of other ECBs already outstanding
For each reporting event
- Bank advices or FIRC for drawdown and repayment
- Loan Registration Number (LRN) from RBI
- Interest and fee calculations
- Form 15CA/15CB where interest is remitted abroad
Key ECB rules after the 2026 amendment
Here is the position since 16 February 2026. Your AD bank confirms the exact position for your loan.
| Item | Current position |
|---|---|
| Eligible borrowers | Companies and LLPs, including entities with an approved restructuring plan where it permits |
| Recognised lenders | Any person resident outside India, foreign branches of RBI-regulated entities, and IFSC institutions |
| Borrowing limit | The higher of USD 1 billion or 300% of net worth per the last audited balance sheet |
| Minimum average maturity (MAMP) | Three years as the default; shorter periods allowed for manufacturing borrowers within set caps |
| Pricing | The earlier all-in-cost ceiling is gone; pricing follows market conditions |
| Reporting | Form ECB-2 is event-based, within seven calendar days; monthly filing has ended |
How it works
Test your eligibility and limit
We check your entity, the lender and the amount against the limit, MAMP and end-use rules before you sign anything.
Settle the loan terms
We review the draft agreement for maturity, pricing and call or put options. Related-party loans need arm’s length pricing.
Get the LRN through your AD bank
Your AD bank submits the loan details to RBI and receives the Loan Registration Number. You quote it on every report.
Report each event on ECB-2
Every drawdown, repayment or change goes on Form ECB-2 through the AD bank within seven calendar days. We prepare the data and track the dates.
Timelines
Before drawdown
Register the loan and get the LRN through your AD bank. Do this before you draw any money.
Within seven calendar days
Form ECB-2 is now event-based. File it within seven calendar days under the 2026 amendment instead of the old monthly return.
Three-year window
A late submission fee route stays open for three years from the due date. After that, the case goes to compounding.
What happens if you miss ECB-2
Late submission fee
RBI charges ₹7,500 plus 0.025% of the amount involved for each year of delay, rounded up to the nearest month, capped at the amount involved.
FEMA penalty
Section 13(1) of FEMA allows a penalty of up to three times the sum involved, up to ₹2 lakh where the amount cannot be quantified, and up to ₹5,000 a day for a continuing default.
Untraceable tag
Persistent non-filers can be classed as untraceable by RBI. That makes your next ECB or AD bank request harder.
Frequently asked questions
What is ECB compliance in simple terms?
ECB compliance means following RBI’s rules at each stage of a foreign loan: eligibility, registration with a Loan Registration Number, and reporting every event on Form ECB-2 through your AD bank. The framework is the FEM (Borrowing and Lending) Regulations, 2018 as amended in 2026. Done on time, it adds no extra cost.
Can an LLP take an ECB now?
Yes. The first amendment to the FEM (Borrowing and Lending) Regulations, effective 16 February 2026, expressly makes LLPs eligible borrowers. They follow the same limit, maturity and reporting rules as companies. We can check your LLP against the framework before you approach a lender, so there are no surprises later.
What is the ECB borrowing limit?
An eligible borrower can raise ECB up to the higher of USD 1 billion or 300% of net worth, based on the last audited balance sheet. The exact calculation depends on what ECB and other borrowing is already outstanding. We run the numbers on your latest accounts first.
What is the minimum average maturity for an ECB?
The default is three years. Manufacturing borrowers can use shorter maturities within caps the amendment sets, and call or put options stay restricted until the minimum maturity is complete. Here is the catch: repaying before the minimum maturity can itself breach the rules. We review your agreement for this before signing.
How soon must ECB-2 be filed now?
Within seven calendar days of the reportable event. The 2026 amendment replaced the old monthly ECB-2 with event-based reporting. The AD bank submits it to RBI. A missed date attracts a late submission fee. We keep a date tracker for every drawdown and repayment, so nothing is missed.
Is there a cap on the interest rate?
No. The all-in-cost ceiling was removed in the 2026 amendment, and pricing now follows market conditions. Related-party loans still need arm’s length pricing backed by transfer pricing documents. We check the pricing against your lender terms.
What is the penalty for late ECB-2 filing?
In practice, the first step is a late submission fee of ₹7,500 plus 0.025% of the amount involved for each year of delay, capped at the amount. The route is open for three years from the due date. Beyond that, FEMA Section 13(1) penalties and compounding apply. Fixing it early costs less.
Do I still file the FLA return if I have an ECB?
The FLA return is a separate annual RBI filing, due on 15 July, for entities that hold FDI or have made overseas direct investment. It is not part of ECB-2. If you also have foreign investment on your books, you file both. We confirm which filings apply to your entity, and calendar each one.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
Government charges depend on your loan. The AD bank may levy its own processing charges, and a late submission fee applies only if a filing is delayed.
Ready to begin?
Share your loan terms or term sheet. We will check the limit, maturity and ECB-2 dates before you draw the first rupee.