Why in news?
The Reserve Bank of India (RBI) released a draft framework in October 2025 to simplify rules for Indian companies borrowing from abroad. The proposal aims to encourage foreign investment and improve foreign exchange liquidity.
Key changes proposed
- Expanded eligibility: More sectors and entities, including start‑ups and non‑bank financial companies, may be allowed to tap overseas loans.
- Relaxed end‑use restrictions: Borrowers might be permitted to use funds for working capital, general corporate purposes and refinancing of existing loans.
- Simplified reporting: A single platform for ECB approvals and monitoring could replace multiple forms, reducing compliance burden.
- Cost ceilings: The existing cap on interest rates may be reviewed to reflect market conditions.
Significance
- Cheaper foreign loans can help Indian companies expand operations and repay high‑cost domestic debt.
- More flexible rules could boost investment in infrastructure and green projects.
- By attracting foreign currency inflows, the reforms may stabilise the rupee and increase foreign exchange reserves.
The RBI has sought comments from stakeholders before finalising the framework.
