Module: | MODULE A: INTERNATIONAL BANKING
Q145: Consider the following statements regarding the borrowing limits for External Commercial Borrowings under the revised 2026 framework:
Statement 1. Under the revised 2026 framework, eligible borrowers can raise funds up to a maximum limit of exactly 750 million United States Dollars per financial year under the automatic route.
Statement 2. The revised limit for borrowings is defined as the higher of 1 billion United States Dollars outstanding or 300 percent of the borrower's standalone net worth.
Statement 3. Borrowings under this framework can be raised in either foreign currency or Indian Rupees.
Which of the above statements is/are correct?
Statement 2. The revised limit for borrowings is defined as the higher of 1 billion United States Dollars outstanding or 300 percent of the borrower's standalone net worth.
Statement 3. Borrowings under this framework can be raised in either foreign currency or Indian Rupees.
Which of the above statements is/are correct?
✅ Correct Answer: B
The correct combination is Statement 2 and 3. Under the Reserve Bank of India's Foreign Exchange Management Amendment Regulations effective 9 February 2026, the borrowing limit for External Commercial Borrowings was significantly liberalized.
An External Commercial Borrowing is a commercial loan raised by eligible resident entities from recognized non-resident entities.
These loans can be denominated in any freely convertible foreign currency or in Indian Rupees.
Structurally, the new 2026 framework links borrowing capacity directly to a company's financial resilience.
Historically, until early 2026, the framework imposed a strict automatic route cap of 750 million United States Dollars per financial year for all eligible borrowers.
The February 2026 amendment replaced this static cap with a dynamic limit, allowing eligible entities to raise up to the higher of 1 billion United States Dollars in outstanding borrowings, or total outstanding borrowings up to 300 percent of their standalone net worth based on the latest audited balance sheet.
This regulatory shift was driven by the need to provide large corporates, especially in capital-intensive sectors, with flexible, long-term offshore funding aligned with their actual balance sheet strength rather than a uniform threshold.
An External Commercial Borrowing is a commercial loan raised by eligible resident entities from recognized non-resident entities.
These loans can be denominated in any freely convertible foreign currency or in Indian Rupees.
Structurally, the new 2026 framework links borrowing capacity directly to a company's financial resilience.
Historically, until early 2026, the framework imposed a strict automatic route cap of 750 million United States Dollars per financial year for all eligible borrowers.
The February 2026 amendment replaced this static cap with a dynamic limit, allowing eligible entities to raise up to the higher of 1 billion United States Dollars in outstanding borrowings, or total outstanding borrowings up to 300 percent of their standalone net worth based on the latest audited balance sheet.
This regulatory shift was driven by the need to provide large corporates, especially in capital-intensive sectors, with flexible, long-term offshore funding aligned with their actual balance sheet strength rather than a uniform threshold.