What changed
Previously, remittances for security deposits on aircraft operating leases required a standby letter of credit or guarantee from a reputed international bank or an AD in India against a counter-guarantee. Now, ADs can permit airline companies (excluding public sector entities) to remit up to USD 1 million per aircraft without such guarantees, provided conditions like board approval and bona fides are met. For public sector airlines, remittances above USD 100,000 per aircraft require a specific waiver from the Ministry of Finance.
What it means for you
This eases the financial burden on private airline companies by reducing the need for costly international guarantees for security deposits on aircraft operating leases. Banks can now process these remittances more efficiently, but must ensure strict compliance with conditions like board approval and repatriation of any balance deposit. Public sector airlines still face tighter restrictions, requiring a government waiver for higher amounts.
What you must do
- Verify the airline company's bona fides and ensure it has obtained necessary approvals from the Ministry of Civil Aviation or DGCA.
- Ensure the remittance is in line with the bank's Board-approved policy on advance remittances or has specific Board approval.
- Confirm the security deposit's maturity does not extend beyond the last lease rental installment or the aircraft's return date.
- Ensure any balance security deposit is repatriated before the lease period ends.
- For public sector airlines, obtain a specific waiver from the Ministry of Finance before permitting remittances above USD 100,000 per aircraft.
Who it affects
Authorised Dealer banks handling foreign exchange for aircraft imports, Private airline companies in India, Public sector airline companies and government departments/undertakings, Lessors of aircraft, aircraft engines, and helicopters on operating lease
What is the maximum amount that can be remitted without a guarantee for private airlines?
Up to USD 1,000,000 per aircraft for security deposit towards lease rentals on operating leases.
What conditions must AD banks check before allowing the remittance?
Banks must be satisfied with the transaction's bona fides, ensure the airline has necessary approvals from authorities like DGCA, and that the remittance is approved by the bank's Board or as per its policy.
Are public sector airlines treated differently?
Yes, for public sector airlines or government departments, remittances above USD 100,000 per aircraft require a specific waiver from the Ministry of Finance, in addition to other conditions.