International Financial Services Centres Authority’s (IFSCA) application to make amendments to the Banking Regulation Act to include aircraft lease financing as a financial service has been moved to the department of finance and is being considered, said an executive.
In February, BusinessLine had written quoting sources that the IFSCA was in talks with the Reserve Bank of India and other regulatory authorities to make amendments to the Banking Regulation Act to include aircraft lease financing as a financial service. It is now learnt that the RBI has roped in the department of financial services to evaluate the application.
“The RBI is very positive about this,” said the person, requesting anonymity, while adding that “the application has now been moved to the department of financial services. We are hoping for a result soon.”
Currently, under the Banking Regulations Act, aircraft leasing is not a financial service and therefore banks cannot fund it. “It needs the amendment of the provisions to allow them to finance operating lease entities,” the person explained.
GIFT city as a hub
Aircraft leasing in India is a fairly new stream of business. The government has been boosting aircraft leasing through the GIFT city in Gujarat. Leasing activities are picking up steam at the IFSCA with 13 leasing companies setting up shops.
Dipesh Shah, Executive Director (Development), IFSCA, had told BusinessLine last month that two more players have recently applied and the expectation is that at least 30 leasing transactions will be completed in this calendar year.
While aircraft leasing is a welcome move for interested players, financing is becoming a hurdle for lessors. Lessors have noticed that their costs go up since there is no local funding available for aircraft leasing. Not only that, currently, India seems to be lacking a leasing ecosystem unlike China which has managed to capture a large chunk of the global leasing market share.