A. ECBs up to $50 million come under the automatic approval route while case-specific clearances from the government as well as the Reserve Bank of India are required for borrowings above that figure. The following are the steps for availing ECBs under these two categories:

Under the automatic approval route

• Finalise terms of the loan with lenders.
• Execute documents for the loan
• File three copies of loan agreement with the regional office of the RBI
• Approach the Department of Revenue, Ministry of Finance, with a copy of the loan agreement for exemption from withholding tax under section 10(15)(iv) of Indian Income Tax Act, 1961.
• Approach lenders for drawdown of the loan, after fulfilling conditions precedent.

For ECBs exceeding $50 million

• Approach lenders for an indicative quote for arranging the
• Obtain necessary approvals from the Government of India/RBI
• Obtain exemption from withholding tax under section 10(15)(iv) of Indian Income Tax Act, 1961.
• Execute Loan agreement
• Drawdown of the loan, after complying with the conditions precedent.

Note: With effect from 2nd June, 2001, as per the Finance Act 2001, exemption from withholding tax under sections 10(15)(iv), (d), (e) and (f) has been withdrawn.