What is External Commercial Borrowing (ECB) and when can an India subsidiary use it?

ECB is a framework that allows Indian entities to raise debt from recognised overseas lenders, including a foreign parent company, instead of relying solely on Indian banks. It comes with conditions: a minimum average maturity period depending on the loan amount and purpose, restrictions on end-use (working capital, capital expenditure, and refinancing are typically allowed; some uses like on-lending or real estate are restricted), and an all-in-cost ceiling capping the effective interest rate.

ECBs must be reported to the RBI through an authorised dealer bank, including registration and periodic reporting for the life of the loan. For MNCs, ECB from the parent can be an efficient way to fund the India subsidiary at rates below local borrowing costs, but the compliance and reporting obligations need to be built into treasury planning from the start, not treated as a formality after the loan is drawn.