Axis Bank, one of India’s largest banks, has made history by becoming the first Indian bank to execute an aircraft lease deal for 34 trainer aircraft for Air India. This deal is significant not only for Axis Bank but also for Indian aviation finance, as it marks the first transaction where all stakeholders, including the lender, borrower, law firm, facility agent, and security agent, worked through their entities based in the Gujarat International Finance Tec-City (GIFT City). GIFT City is India’s new international financial services center (IFSC), which offers a favorable tax regime and a strong regulatory framework for domestic and international financiers.
Traditionally, Indian airlines have relied on multinational banks and foreign lenders for aircraft leases, mainly routed through Dublin, Ireland. However, with the growth of GIFT City, this is changing. Air India has already closed eight lease deals worth $1 billion, including with international lenders, and IndiGo Airlines has financed 20 Airbus A321Neos for $1.8 billion through international lenders. The Indian government is actively promoting the use of GIFT City as a financial hub for cross-border deals, particularly in the aviation sector.
The Indian government has identified $30 billion in funding for fleet modernization and expansion, and Indian airlines have ordered a total of 1,600 aircraft worth $100 billion to be delivered over the next 10 years. Indian banks are keen to finance these deals, and several other banks have expressed interest in entering the space following Axis Bank’s deal. The government is committed to facilitating domestic and foreign banks in structuring and financing leases out of GIFT City.
The new law allowing faster repossession of defaulted aircraft has also boosted confidence in the sector. With its favorable tax regime and strong regulatory framework, GIFT City is poised to become a major hub for aviation finance in India. The Axis Bank deal is a significant milestone in this journey, and it is expected to pave the way for more Indian banks to participate in aircraft lease deals, reducing the country’s dependence on foreign lenders and promoting the growth of the domestic aviation industry.