Apart from the maturity and end - use requirements, the financial terms and conditions of each ECB proposal are required to be reasonable and market - related. The choice of the sourcing of ECB, currency of the loan, and the interest rate basis (i.e. floating or fixed), will be left to the borrowers.

Security
The choice of security to be provided to the lenders/ suppliers will also be left to the borrowers. However, where the security is in the form of a guarantee from an Indian financial institution or from an Indian scheduled commercial bank, counter - guarantee or confirmation of the guarantee by a foreign bank/ foreign institution will not be permitted.

Exemption from withholding tax
All interest payments and fees etc. related to external commercial borrowings would be eligible for withholding tax exemption under Section 10(15) (iv) (b) to (g) of the Income Tax Act, 1961. Exemptions under section 10(15) (iv) (b), (d) to (g) are granted by the Department of Economic Affairs while exemption under section 10(15) (iv) (c) is granted by the Department of Revenue, Ministry of Finance.

Approval under FERA
After receiving the approval from the ECB Division, Department of Economic Affairs, Ministry of Finance, the applicant is required to obtain approval from the Reserve Bank of India under the Foreign Exchange Regulation Act, 1973, and to submit an executed copy of the loan agreement to this department for taking the same on record, before obtaining clearance from the RBI for drawing the loan. Monitoring of end use of ECB will continue to be done by RBI.

Short - term loan from RBI
While external commercial borrowing for minimum maturity of three years and above will be sanctioned by the Department of Economic Affairs, Ministry of Finance, approvals for short term foreign currency loans with a maturity of less than three years will be sanctioned by the RBI, according to the RBI guidelines.

Validity of approval
Approvals are valid for an initial period of three months, i.e. the executed copy of the loan agreement is required to be submitted within this period.