In exercise of the powers conferred by subsection 2 of Section 6 and Section 47 of the Foreign Exchange Management Act

## Report on Foreign Exchange Management Borrowing and Lending Amendment Regulations, 2022 **1. Executive Summary:** This report analyzes the Foreign Exchange Management (Borrowing and Lending) Amendment Regulations, 2022, as notified by the Reserve Bank of India (RBI) on July 28, 2022. This amendment temporarily increases the External Commercial Borrowing (ECB) limit from USD 750 million to USD 1500 million per financial year. The amendment aims to provide temporary relief and increased access to foreign funding for eligible entities until December 31, 2022. This report details the specific changes introduced, the likely rationale behind them, and their potential impact on stakeholders. **2. Introduction:** This report provides an overview and analysis of the Reserve Bank of India's Foreign Exchange Management (Borrowing and Lending) Amendment Regulations, 2022 (Notification No. FEMA.3R32022RB), based solely on the text of the official notification. The purpose is to inform stakeholders about the specific changes introduced to the existing regulations governing foreign exchange borrowing and lending. **3. Policy Overview:** * This amendment modifies the Foreign Exchange Management Borrowing and Lending Regulations, 2018 (Notification No. FEMA.3R2018RB dated December 17, 2018). * The core objective, as inferred from the text, is to provide increased flexibility for entities to access foreign funding through External Commercial Borrowings (ECBs). **4. Background and Rationale:** The amendment increases the ECB limit, suggesting a need to facilitate greater access to foreign capital. The temporary nature of the increased limit (until December 31, 2022) indicates a possible short-term response to market conditions or specific financing requirements within the stipulated period. A possible rationale is to stimulate investment or address temporary liquidity needs by allowing increased foreign currency borrowing. **5. Key Provisions / Changes:** This amendment introduces the following change: * **Specific Part of Original Policy Changed:** Schedule 1 to the Principal Regulations, specifically Paragraph 2. * **New Rule/Provision:** Paragraph 8A is added to Schedule 1, stating that "The limit of USD 750 million or equivalent per financial year is temporarily increased to USD 1500 million or equivalent. This dispensation will be available for ECBs raised till December 31, 2022." * **Difference/Effect of the Change:** The amendment effectively doubles the permissible ECB amount that eligible entities can raise in a financial year, from USD 750 million to USD 1500 million. This increased limit is only applicable for ECBs raised until December 31, 2022. Post this date, the original limit of USD 750 million will likely be reinstated. **6. Target Audience and Stakeholders:** The primary target audience and stakeholders are: * Entities eligible to raise External Commercial Borrowings (ECBs) under the existing Foreign Exchange Management (Borrowing and Lending) Regulations, 2018. This includes a broad range of Indian companies and institutions that meet the eligibility criteria for accessing foreign funds through ECBs. * Banks and financial institutions involved in facilitating and managing ECB transactions. **7. Implementation Aspects (Inferred):** * **Responsible Agency/Bodies:** The Reserve Bank of India (RBI), specifically the Foreign Exchange Department, is the responsible body for implementing and overseeing these regulations. * **Timelines:** The increased ECB limit is available for ECBs raised *until* December 31, 2022. This indicates a clear deadline for availing of the increased limit. * There are no procedural change mentioned in this notification. The standard ECB procedure should be followed **8. Expected Outcomes / Impact of Changes:** The likely intended outcome of this amendment is: * Increased inflow of foreign capital into the Indian economy. * Greater availability of funds for eligible entities to finance investments, expansion, or working capital needs. * A potential boost to economic activity, particularly in sectors that rely on foreign funding. * A potential increase in the external debt of the country. The temporary nature of the change suggests the RBI intends to monitor the impact of increased borrowing and adjust policy accordingly. **9. Conclusion:** The Foreign Exchange Management (Borrowing and Lending) Third Amendment Regulations, 2022, represents a temporary measure by the RBI to enhance access to foreign funding through ECBs by increasing the limit to USD 1500 million until December 31, 2022. This amendment is significant as it provides eligible entities with greater flexibility to tap into international financial markets during this period. Stakeholders should take note of the limited time window for availing of this increased limit and plan their borrowing strategies accordingly. The RBI's decision to implement this change suggests a proactive approach to managing the country's foreign exchange dynamics and supporting economic growth.

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