Schedule I explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The last four paragraphs of Schedule I cover what happens after an external commercial borrowing (ECB) is in place: converting it into a non-debt instrument, changing its terms, servicing the debt, and reporting through Form ECB 1, Revised Form ECB 1 and Form ECB 2.
This is Schedule I of the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 (Notification No. FEMA.3(R)/2018-RB, December 17, 2018), as per the text on the Reserve Bank's site, amended up to February 16, 2026. An ECB may be converted into a non-debt instrument with lender consent and no extra cost to the lender. Debt servicing may be remitted, and an NRO-sourced ECB is repaid only into the NRO account. Form ECB 2 and Revised Form ECB 1 are due within seven calendar days from the end of the relevant month, and a borrower can be treated as untraceable after four consecutive quarters of silence.
Authority and the Schedule
The Regulations rest on the Foreign Exchange Management Act, 1999. Their preamble cites "clauses (a), (d) and (e) of Sub-Section (3) of Section 6, sub-section (2) of Section 47". The Act text now prints section 6(3) as omitted, and section 47(3) keeps earlier Reserve Bank regulations in force until amended or rescinded. See the Act articles on section 6 and sections 47 and 48.
Schedule I was substituted with effect from February 16, 2026 by Notification No. FEMA 3(R)(5)/2026-RB dated February 09, 2026. The forms are named here only as the Schedule names them; the Reserve Bank's reporting formats are not described in the sources consulted. For the filing work itself, see our ECB-2 monthly return service.
Paragraph 13: conversion into a non-debt instrument
- 13(1). An ECB (including one that has matured but is unpaid) may be converted into a non-debt instrument, subject to the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. Those Rules are not in the sources consulted; read them from the official site.
- 13(2). Conditions: no additional cost payable to the lender for enabling the conversion; the lender's consent is in place; and consent of other lenders, if any, is available, or at least information about the conversion is exchanged with them.
- 13(3). The prudential regulations, including those on restructuring, apply if the borrower has availed credit facilities from an entity (including its foreign branch or subsidiary) regulated by the Reserve Bank.
- 13(4). The ECB liability eligible for conversion is determined at the exchange rate on the date of the agreement for conversion between the parties, or at a rate which does not result in a liability higher than that rate would give.
Paragraph 14: change of parameters, terms and conditions
Changes to the parameters, terms and conditions governing the ECB may be made subject to the lender's consent and compliance with the Schedule (14(1)). If the tenor is extended, the same prudential regulations on restructuring apply where the borrower has other facilities from a Reserve Bank regulated entity (14(2)). A change of designated AD Category I bank needs a "no objection certificate" from the existing designated bank (14(3)).
Paragraph 15: debt servicing
Principal, interest and other charges on ECBs undertaken in compliance with the ECB framework may be remitted (15(1)). Where the ECB was availed from the lender's NRO account, repayment is credited to the NRO account only (15(2)).
Paragraph 16: reporting
| Item | What paragraph 16 says |
|---|---|
| 16(1)(a) Form ECB 1 | Gives details of the ECB and obtains the LRN |
| 16(1)(b) Revised Form ECB 1 | Reports any change in parameters previously reported, within seven calendar days from the end of the month in which the change was given effect; may also report any change in other information reported in Form ECB 1 |
| 16(1)(c) Form ECB 2 | Reports receipt of ECB proceeds and debt servicing, within seven calendar days from the end of the month in which the proceeds were received or debt servicing was undertaken; any event or transaction that alters the outstanding borrowing under an LRN is reported in Form ECB 2 |
| 16(2) | On non-adherence with the timelines, the borrower may pay a late submission fee as per Reserve Bank guidelines after completing the reporting |
| 16(3) | The designated AD Category I bank submits the application or return, with due certification, to the Reserve Bank in the manner and format advised |
| 16(4) | If the borrower reports a pending investigation, adjudication or appeal, the bank provides complete details of the borrowing to the agencies concerned |
| 16(5) | The bank may approach the Reserve Bank to cancel an allotted LRN at the borrower's request, if no drawdown has taken place |
All returns go through the designated AD Category I bank in the format the Reserve Bank provides. The Schedule gives no formula for the late submission fee; it points to Reserve Bank guidelines.
Untraceable borrowers
Paragraph 16(6) treats a borrower with an active LRN as untraceable if:
- the borrower fails to submit any specified return for four consecutive quarters or more after the quarter in which a drawdown or debt servicing was scheduled under the last reported Form ECB 1; and
- the designated bank, after the four quarters, is satisfied that neither the borrower nor its auditors, directors or promoters were reachable or responsive despite multiple documented attempts, and the borrower was not found operative at its registered office address on the bank's records.
If a borrower qualifies as untraceable after a drawdown, paragraph 16(7) requires the designated bank to inform both the Reserve Bank and the Directorate of Enforcement. That makes the return calendar a matter of more than the late fee.
Example
Harbour Polymers Limited, an invented company, drew an ECB in the middle of a month and repaid interest in the next. For the drawdown month, Form ECB 2 reporting the receipt is due within seven calendar days from the end of that month; for the interest month, a further Form ECB 2 is due within seven calendar days from the end of that month. If the company and its lender later agree to convert the loan into equity, paragraph 13 needs lender consent, no extra cost to the lender, information to other lenders, and the Non-Debt Instruments Rules. If the lender agrees to extend the tenor, a Revised Form ECB 1 is due within seven calendar days from the end of the month in which the change took effect.
Our guides on ECB reporting and Form ECB-2 and how to file the monthly return cover the filing mechanics; this article takes only what the Schedule prints. Amendments and circulars after February 16, 2026 should be checked, especially for the late submission fee and the reporting format.
Need help with ECB returns?
Missing a seven-day window can bring a late submission fee and, if the silence goes on for four quarters, the untraceable-borrower process. Our ECB-2 monthly return team prepares and files the monthly return through your designated bank.
Key takeaways
- Conversion of ECB into a non-debt instrument needs lender consent, no added cost to the lender, and the Non-Debt Instruments Rules.
- Changes to ECB terms need lender consent; extension of tenor attracts prudential rules; changing the designated bank needs a no objection certificate.
- Form ECB 2 and Revised Form ECB 1 fall due within seven calendar days from the end of the relevant month.
- A late submission fee may apply as per Reserve Bank guidelines, after the reporting is completed.
- Four consecutive quarters of missed returns can make a borrower untraceable, with information to the Reserve Bank and the Directorate of Enforcement.
Read next
- ECB cost, proceeds, security and refinancing: paragraphs 7 to 12
- Trade credit for imports: Schedule II
- ECB reporting: Form ECB-2 monthly return
- How to file Form ECB-2
Disclaimer: Based on the rules, regulations and Reserve Bank Master Directions under the Foreign Exchange Management Act, 1999 that this article names, each in the version and up to the date stated in the article, as consulted on 2 October 2026. Some texts are third-party copies or older prints and are identified as such. Limits, forms and time limits change by amendment and circular; later changes should be checked on the Reserve Bank and Gazette sites. This article is general information, not legal advice; check the official text before acting.