The Reserve Bank of India (RBI) on February 10, 2026, issued the Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026 to further amend the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 (Notification No. FEMA 3(R)/ 2018-RB dated December 17, 2018).
The following amendments have been stated:
After the existing regulation 3, the following regulation shall be inserted, namely:-
“3A. Restriction on end-use of borrowed funds:- Funds borrowed in terms of these Regulations shall not be utilised for the following purposes in India:
(a) Chit funds;
(b) Nidhi Company;
(c) Real estate business and construction of farmhouses, provided that:
(i) in case of a borrowing for construction-development project, the borrower shall sell plots only after ensuring development of trunk infrastructure i.e. roads, water supply, street lighting, drainage and sewerage.
(ii) in case of borrowing for industrial parks, such parks shall comprise of a minimum of 10 units with no single unit occupying more than 50 percent of the allocable area and the minimum percentage of the area to be allocated for industrial activity shall not be less than 66 percent of the total allocable area.
Explanation: "Allocable area" in the Industrial Park means—
(i) in the case of plots of developed land - the net site area available for allocation to the units, excluding the area for common facilities.
(ii) in the case of built-up space - the floor area and built-up space utilized for providing common facilities.
(iii) in the case of a combination of developed land and built-up space - the net site and floor area available for allocation to the units excluding the site area and built-up space utilized for providing common facilities.
(d) Agricultural and animal husbandry, except –
(i) Floriculture, horticulture and cultivation of vegetables and mushrooms under controlled conditions;
(ii) Development and production of seeds and planting material;
(iii) Animal husbandry (including breeding of dogs), pisciculture, aquaculture and apiculture; and
(iv) Services related to agro and allied sectors Explanation: The term ‘under controlled conditions’ covers the ‘cultivation under controlled conditions’ for the categories of floriculture, horticulture, cultivation of vegetables and mushrooms which is the practice of cultivation wherein rainfall, temperature, solar radiation, air humidity and culture medium are controlled artificially. Control in these parameters may be effected through protected cultivation under green houses, net houses, poly houses or any other improved infrastructure facilities where micro-climatic conditions are regulated anthropogenically.
(e) Plantation except tea, coffee, rubber, cardamom, palm oil tree, olive oil tree plantation (f) Trading in Transferrable Development Rights (TDR);
(g) Transacting in listed/unlisted securities, except for transactions undertaken by an Indian entity for corporate actions such as merger, demerger, amalgamation, arrangement, or acquisition of control in accordance with the Act under which the entity is incorporated/established, Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Insolvency and Bankruptcy Code, 2016, as applicable;
Explanation: For sub-regulation 1(g), borrowing shall be availed for strategic purposes only, i.e. those driven by the core objective of creating long-term value through potential synergies, rather than for short-term gains.
(h) Repayment of a domestic INR loan (i) which was availed for an end-use restricted under this regulation; or (ii) which is classified as a non-performing asset (NPA) as per the applicable prudential norms.
(i) On-lending for any of the purposes for which funds cannot be borrowed and utilised in this regulation.
In regulation 6(B) of the Principal Regulations, sub-regulations (vi) shall be substituted by the following, namely:-
“(vi) A person resident in India being an individual may borrow in INR from an NRI or a relative who is an OCI cardholder for utilization in India, subject to the following terms and conditions:
(a) The amount of loan should be received either by inward remittance from outside India or by debit to NRE / NRO / FCNR(B) / SNRR account of the lender; and
(b) Borrowing shall be on non-repatriation basis; i.e. payment of interest and repayment of principal shall be made only to the NRO account of the lender.”
They shall come into force from February 10, 2026.
[Notification No. FEMA 3(R)(5)/2026-RB]
