To enable Indian banks and financial institutions to develop an aircraft-leasing ecosystem at GIFT City, the Ministry of Civil Aviation has sought support from the Ministry of Finance.
It has also raised concern over slow progress in developing aircraft leasing in India.
According to a senior government official, the civil aviation ministry has laid emphasis on Indian banks adopting globally aligned practices by undertaking asset-backed aircraft financing, supported by a stronger security framework enabled through the passage of the Cape Town Convention Bill.
(The Cape Town Convention is a global treaty that guarantees the rights of lessors to repossess leased high-value equipment such as aircraft, engines, and helicopters in the case of a payment default.).
“Additionally, the ministry has proposed financial institutions establish aircraft leasing companies in GIFT City through subsidiaries or joint ventures, which would reduce geopolitical risks and promote self-reliance, especially in the light of global disruption like the Russia-Ukraine conflict,” the official added.
Indian banks have largely limited their exposure to balance sheets or working-capital financing for airlines, the official said, adding, this has led to unpleasant experiences, dampening their risk appetite.
Banks often approach aircraft financing like project financing, demanding additional collateral and offering little differentiation.
This poses a hurdle to the growth of aircraft leasing at GIFT City.
“The absence of financial institution-sponsored leasing entities in India limits the ability to structure deals efficiently, retain value locally, and foster a robust aviation-leasing ecosystem.
"To address these gaps, regulatory interventions, financial incentives, and dedicated credit lines from local financial institutions are crucial,” the official said.
Over 70 per cent of India’s aircraft fleet is on operating lease, showing dependence on foreign lessors to support airline capacity expansion.
"This leasing model has led to an annual rental outflow exceeding $5 billion, representing a foreign-exchange burden and highlighting the need for developing a domestic aircraft-leasing ecosystem,” the official added.
The official further said the limited availability of domestic capital, highlighting it as a key obstacle in advancing aircraft leasing operations at GIFT City.
“Debt financing by Indian banks is critical in bringing global lessors to GIFT City.
"In contrast, regional hubs like China and Japan have benefited from strong support by their domestic banks,” he added.
On October 16, 2020, the government, on the recommendation of International Financial Services Centres Authority, had notified “aircraft leasing”.
That includes giving the status of “financial products” to operating and financial leasing — and a combination of the two — of aircraft, helicopters, and engines of aircraft or helicopters, or their any part.
This was under the International Financial Services Centres Authority Act, 2019.
In the Union Budget of July 2019, Union Finance Minister Nirmala Sitharaman had said the time was ripe for India to enter into aircraft financing and leasing on its own soil.
India is the third-largest domestic aviation market in the world.
With an order book exceeding 1,500 aircraft, the country is preparing to scale up its fleet capacity.
“This expansion represents more than a $100 billion opportunity for aircraft leasing, financing, maintenance, and associated services, positioning India as a critical hub in the global aviation value chain,” the official said.
On April 2, 2025, the Rajya Sabha passed the Protection of Interests in Aircraft Objects Bill, 2025, which seeks to implement international conventions on the leasing of aviation equipment.
Union Civil Aviation Minister Kinjarapu Rammohan Naidu said the new Bill would provide a boost to aircraft leasing.
“We are leasing many planes every year. Ireland has a big leasing industry, and Dubai and Singapore have taken the lead in this industry.
"In Indian skies, 840 planes are operating, and 86.4 per cent of those are in the leasing model today. Airlines prefer the leasing model, and they go to other countries and lease,” he said.
India’s fleet at the end of FY24 (837) is at a similar level as China’s more than two decades ago. China had 800 aircraft in 2000.
Growing concern
- Indian banks’ risk aversion is hampering aircraft leasing growth in India
- MoCA seeks financial support to boost the leasing ecosystem
- India’s aviation market offers $100 billion opportunity in aircraft leasing
- Over 70% of India’s fleet on lease is creating foreign exchange burden
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