Amendment to the ‘Framework for Aircraft Lease’ with regard to transactions with person (s) resident in India

1 | P a g e CIRCULAR F. No. 172/IFSCA/Finance Company Regulations/2024-25/01 October 30, 2024 To, All Finance Company / Finance Unit registered in the International Financial Services Centres (IFSCs) Subject: Amendment to the ‘Framework for Aircraft Lease’ with regard to transactions with person (s) resident in India. 1. Reference is drawn to the International Financial Services Centres Authority (Finance Company) Regulations, 2021 (FC Regulations) and the ‘Framework for Aircraft Lease’ (AL Framework) issued thereunder vide Circular No. 172/IFSCA/Finance Company Regulations/2022-23/01, dated May 18, 2022, as amended from time to time. 2. The AL Framework has now been amended with the insertion of a new clause, clause O.2 (Transactions with person resident in India). 3. The updated AL Framework, incorporating the above-mentioned clause is annexed to the circular and may also be accessed at www.ifsca.gov.in 4. This Circular is issued in exercise of powers conferred by section 12 of the IFSCA Act 2019, to develop and regulate the financial products, financial services and financial institutions in the IFSCs and the amendment to the AL Framework shall come into force with immediate effect. Yours faithfully, Riddhi Bhandari General Manager riddhi.bhandari@ifsca.gov.in Annexure CIRCULAR F. No. 172/IFSCA/Finance Company Regulations/2022-23/01 May 18, 2022 (Updated as on October 30, 2024) All Finance Company / Finance Unit registered in the International Financial Services Centres (IFSCs) Framework for Aircraft Lease In exercise of the powers conferred by sub-clause (vi) of clause (d) of sub-section (1) of section 3 of the International Financial Services Centres Authority Act, 2019 (hereinafter referred to as ‘IFSCA Act’), the Government of India vide Gazette Notification number S.O. 3652(E) dated October 16, 2020 has notified aircraft lease, including operating and financial lease and any hybrid of operating and financial lease of aircraft or helicopter and engines of aircraft or helicopter or any other part thereof, as a ‘financial product’. 2. Further, in exercise of the above powers, the Government of India vide Gazette Notification number S.O.5199 (E) dated December 14, 2021, has notified operating lease, including any hybrid of operating and financial lease of such product or equipment as may be specified by International Financial Services Centres Authority, as a ‘financial product’. 3. In exercise of the powers drawn from the aforementioned notification, the International Financial Services Centres Authority (hereinafter referred to as ‘IFSCA’) has specified an operating lease, including an hybrid of operating and financial lease, in respect of the following equipment, as ‘financial product’1: “(a) any piece of mobile equipment, whether or not powered or self-propelled, purpose designed, built and used for ground handling, servicing or field maintenance of aircraft on the ramp area of an airport and includes any piece of ground support equipment specified as such by IATA from time to time; and 1 Notified vide Gazette Notification No. IFSCA/2022-23/GN/023- dated April 12, 2022, read with corrigendum No. IFSCA/2022-23/GN/023 dated April 27, 2022. (b) equipment used for providing services necessary for ramp handling including activities as specified in Schedule–I of the Notification number F. No. AAI/OPS/707/GHR-2018 dated 26th October, 2018 issued by Airports Authority of India, published in the Gazette of India, Extraordinary, Part III, Section 4, dated the 30th October, 2018, as amended from time to time. Explanation: The aforementioned equipment shall collectively be referred to as the ‘Aircraft Ground Support Equipment’.” (c) Aviation training simulation devices2 shall include devices as may be permitted by the Authority. 4. 3[As per sub-clause (g) of clause (iii) of sub-regulation (1) of regulation 5 of International Financial Services Centres Authority (Finance Company) Regulations, 2021 (hereinafter referred to as “Finance Company Regulations”) an operating lease transaction for aircraft lease is classified as a ‘permitted non-core activity’ and as per sub-clause (a) of clause (ii) of sub-regulation (1) of regulation 5 of the Finance Company Regulations a financial lease transaction for aircraft lease is classified as a ‘permitted core activity’ which includes a hybrid of financial lease and operating lease transaction for aircraft lease.] 5. The IFSCA, in order to facilitate setting up of the Aircraft Leasing business in the International Financial Services Centres (hereinafter referred to as “IFSCs”) and in exercise of the powers conferred under section 12, read with section 13 of the IFSCA Act, 2019, hereby specifies the following framework for entities to get registered under Finance Company Regulations as a ‘Finance Company’ or a ‘Finance Unit’ for undertaking aircraft lease transactions: 2 Notified vide Gazette Notification No. IFSCA/2022-23/GN/037- dated April 11, 2023. 3 Revised vide IFSCA (Finance Company) (Amendment) Regulations, 2022- dated July 01, 2022. Before revision it stood as under: “As per sub-clause (j) of clause (iii) of sub-regulation (1) of regulation 5 of International Financial Services Centers Authority (Finance Company) Regulations, 2021 (hereinafter referred to as “Finance Company Regulations”) an operating lease transaction for aircraft lease is classified as a ‘permitted non-core activity’ and as per sub-clause (d) of clause (ii) of sub-regulation (1) of regulation 5 of the Finance Company Regulations a financial lease transaction for aircraft lease is classified as a ‘permitted core activity’ which includes a hybrid of financial lease and operating lease transaction for aircraft lease.” A. Applicability: This framework shall apply to all applicants desirous of seeking registration for one or more of the permissible activities specified under this Circular. B. Definition: For the purpose of this Circular: (i) “Aircraft Ground Support Equipment” shall have the same meaning as assigned to it under Explanation of the Gazette Notification number IFSCA/2022-23/GN/023- dated April 12, 2022, issued by the IFSCA. (ii) 4[ “Lessor” shall mean an entity registered with IFSCA as a Finance Company or a Finance Unit in accordance with Finance Company Regulations and - (a) engaged in the business of providing aircraft or helicopter and engines of aircraft or helicopter or any other part thereof and/or aircraft ground support equipment and/or aviation training simulation device under an operating lease, financial lease and/or a hybrid of financial and operating lease; (b) any other related activity as may be specified by the Authority from time to time.] C. Eligibility and Registration Requirement: (i) An applicant desirous of undertaking permissible activities in IFSCs as a Lessor shall meet the eligibility criteria and other requirements as specified under the Finance Company Regulations including the following: (a) The applicant shall set-up operations in IFSC in the form of a Company or a Limited Liability Partnership (LLP) or a Trust or in any other form as may be specified by the IFSCA from time to time. (b) In case the applicant is a company, the ‘promoter’, as defined in the Companies Act, 2013, of the applicant shall be located in a Financial Action Task Force compliant jurisdiction. In case the applicant is an LLP or a Trust, the partners or the trustees, as the case may be, shall also comply with this requirement. 4 Substituted vide Circular No 172/IFSCA/Finance Company Regulations/2022-23/003, dated April 26, 2023. Before substitution, it stood as under: “(ii) Lessor shall mean an entity registered with IFSCA as a Finance Company or a Finance Unit in accordance with Finance Company regulations and - a. engaged in the business of providing aircraft or helicopter and engines of aircraft or helicopter or any other part thereof and/or aircraft ground support equipment under an operating lease, financial lease and/or a hybrid of financial and operating lease; b. any other related activity as may be specified by the Authority from time to time.”