Master Direction - External Commercial Borrowings, Trade Credits and Structured Obligations (Updated as on February 16, 2026)(SupersedesMaster Direction - External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers (Updated as on November 22, 2018))

RBI/FED/2018-19/67 FED Master Direction No.5/2018-19 March 26, 2019 (Updated as on February 16, 2026) (Updated as on January 12, 2026) (Updated as on December 22, 2023) (Updated as on September 30, 2022) (Updated as on August 01, 2022) (Updated as on June 09, 2022) (Updated as on December 10, 2021) (Updated as on April 12, 2021) (Updated as on August 08, 2019)

To All Authorised Dealer Category – I banks and Authorised Banks

Madam / Dear Sir,

Master Direction - External Commercial Borrowings, Trade Credits and Structured Obligations

Transactions on account of External Commercial Borrowings (ECB) and Trade Credit (TC) are governed by sub-section 2 of section 6 of the Foreign Exchange Management Act, 1999 (FEMA). Various provisions in respect of these two types of borrowing are included in the following Regulations framed under FEMA:

• Foreign Exchange Management (Borrowing and Lending) Regulations, 2018, notified vide Notification No. FEMA 3R/2018-RB dated December 17, 2018, as amended from time to time; and
• Foreign Exchange Management (Guarantees) Regulations, 2026, notified vide Notification No. FEMA 8(R)/2026-RB dated January 6, 2026, as amended from time to time.[^1]

2. Within the contours of the Regulations, Reserve Bank of India also issues directions to Authorised Persons under Section 11 of the Foreign Exchange Management Act (FEMA), 1999. These directions lay down the modalities as to how the foreign exchange business has to be conducted by the Authorised Persons with their customers/constituents with a view to implementing the regulations framed.

3. Instructions issued in respect of External Commercial Borrowings and Trade Credits have been compiled in this Master Direction in supersession of earlier directions contained in Master Direction - External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers, dated January 1, 2016, as amended from time to time. The said Master Direction can, however, be accessed using the link provided. The list of underlying notifications/circulars which form the basis of this Master Direction is furnished in the Appendix. Reporting instructions can be found in Master Direction on reporting (Master Direction No. 18 dated January 01, 2016, as amended from time to time).

4. It may be noted that, whenever necessary, Reserve Bank shall issue directions to Authorised Persons through A.P. (DIR Series) Circulars in regard to any change in the Regulations or the manner in which relative transactions are to be conducted by the Authorised Persons with their customers/ constituents and/ or amend the Master Direction issued herewith. This Master Direction has been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/ approvals, if any, required under any other law.

Yours faithfully

(Dr. Aditya Gaiha) Chief General Manager-in-Charge

INDEX

ACRONYMS

• AD: Authorised Dealer
• AIC: All-in-Cost
• AMP: Average Maturity Period
• ARR:[^2] Alternative Reference Rate
• CIRP: Corporate Insolvency Resolution Process
• DSIM: Department of Statistics and Information Management
• DTA: Domestic Tariff Area
• ECA: Export Credit Agency
• ECB: External Commercial Borrowings
• [^3]
• FATF: Financial Action Task Force
• FCCB: Foreign Currency Convertible Bond
• FCEB: Foreign Currency Exchangeable Bond
• FCY: Foreign Currency
• FDI: Foreign Direct Investment
• FEMA: Foreign Exchange Management Act
• FTWZ: Free Trade and Warehousing Zone
• IFSC: International Financial Services Centre
• INR: Indian Rupee
• LIBOR: London Interbank Offered Rate
• LIN: Loan Identity Number
• LRN: Loan Registration Number
• NBFC: Non-Banking Financial Company
• RBI: Reserve Bank of India
• SEBI: Securities and Exchange Board of India
• SEZ: Special Economic Zone
• SIDBI: Small Industries Development Bank of India
• TC: Trade Credit
• USD: United States Dollar
• XBRL: eXtensible Business Reporting Language

1 to 1.17 [^4] [Deleted]

PART I – EXTERNAL COMMERCIAL BORROWINGS FRAMEWORK

2 to 12 [^5] [Deleted]

PART II – TRADE CREDITS FRAMEWORK

13. Introduction: Trade Credits (TC) refer to the credits extended by the overseas supplier, bank, financial institution and other permitted recognised lenders for maturity, as prescribed in this framework, for imports of capital/non-capital goods permissible under the Foreign Trade Policy of the Government of India. Depending on the source of finance, such TCs include suppliers’ credit and buyers’ credit from recognised lenders.

14. Trade Credits Framework: TC for imports into India can be raised in any freely convertible foreign currency (FCY denominated TC) or Indian Rupee (INR denominated TC), as per the framework given in the table below:

2. For buyers’ credit: Banks, financial institutions, foreign equity holder(s) located outside India and financial institutions in IFSCs located in India. Note: Participation of Indian banks and non-banking financial companies (operating from IFSCs) as lenders will be subject to the prudential guidelines issued by the concerned regulatory departments of the Reserve Bank. Further, foreign branches/subsidiaries of Indian banks are permitted as recognised lenders only for FCY TC. | 1. For suppliers’ credit: Supplier of goods located outside India.

3. For buyers’ credit: Banks, financial institutions, foreign equity holder(s) located outside India and financial institutions in IFSCs located in India. Note: Participation of Indian banks and non-banking financial companies (operating from IFSCs) as lenders will be subject to the prudential guidelines issued by the concerned regulatory departments of the Reserve Bank. Further, foreign branches/subsidiaries of Indian banks are permitted as recognised lenders only for FCY TC. | | v | Period of TC | The period of TC, reckoned from the date of shipment, shall be up to three years for import of capital goods. For non-capital goods, this period shall be up to one year or the operating cycle whichever is less. For shipyards / shipbuilders, the period of TC for import of non-capital goods can be up to three years. | The period of TC, reckoned from the date of shipment, shall be up to three years for import of capital goods. For non-capital goods, this period shall be up to one year or the operating cycle whichever is less. For shipyards / shipbuilders, the period of TC for import of non-capital goods can be up to three years. | | vi | All-in-cost ceiling per annum [^6] | Benchmark Rate plus 350 bps spread: For existing TCs linked to LIBOR whose benchmarks are changed to ARR. Benchmark rate plus 300 bps spread: For new TCs. | Benchmark rate plus 250 bps spread. | | vii | Exchange rate | Change of currency of FCY TC into INR TC can be at the exchange rate prevailing on the date of the agreement between the parties concerned for such change or at an exchange rate, which is less than the rate prevailing on the date of agreement, if consented to by the TC lender. | For conversion to Rupee, exchange rate shall be the rate prevailing on the date of settlement. | | viii | Hedging provision | The entities raising TC are required to follow the guidelines for hedging, if any, issued by the concerned sectoral or prudential regulator in respect of foreign currency exposure. Such entities shall have a board approved risk management policy. | The overseas investors are eligible to hedge their exposure in Rupee through permitted derivative products with AD Category I banks in India. The investors can also access the domestic market through branches / subsidiaries of Indian banks abroad or branches of foreign banks with Indian presence on a back to back basis. | | ix | Change of currency of borrowing | Change of currency of TC from one freely convertible foreign currency to any other freely convertible foreign currency as well as to INR is freely permitted. | Change of currency from INR to any freely convertible foreign currency is not permitted. |

4. Trade Credits in SEZ/FTWZ/DTA: