- Aircraft May Soon Be Classified as Infrastructure Assets in India
- Priority Sector Lending for Planes: Government Examines Landmark Policy Shift
- Infrastructure Status for Aircraft Could Transform Aviation Financing Landscape
By Sangeeta Saxena
New Delhi. 14 February 2026. In a significant policy shift aimed at strengthening India’s aviation ecosystem, the Government of India is examining a proposal to classify aircraft as infrastructure assets in the upcoming Union Budget for FY 2026–27. If approved, the move could substantially ease financing constraints faced by airlines and operators, while broadening access to domestic capital.
According to industry sources, the proposal has gained renewed traction after commercial shipping vessels were granted infrastructure status in the previous Union Budget, addressing earlier objections that movable assets cannot qualify as infrastructure. The inclusion of vessels under the infrastructure category has opened the door for a similar classification of aircraft, which are also movable assets but form the backbone of national connectivity and economic integration.
Infrastructure classification would allow aircraft acquisition loans to be considered under the Reserve Bank of India’s Priority Sector Lending (PSL) framework. Under PSL norms, banks are mandated to allocate a portion of their lending to identified priority sectors at concessional rates. Industry executives say this could significantly reduce borrowing costs for airlines and smaller operators.
“Recognising aircraft as infrastructure assets would meaningfully transform the growth trajectory of business aviation in India. It would unlock structured rupee financing from Indian banks and deepen domestic participation in aircraft funding. A progressive and forward-looking move by the Government,” said Sanjeev Choudhary, VP Sales, Jet HQ.
India’s major airlines have collectively placed orders for more than 1,700 aircraft, even as over 800 commercial aircraft are currently in service. While large carriers rely heavily on operating leases denominated in US dollars, smaller and start-up airlines face challenges in securing aircraft through leasing arrangements. High interest rates, limited domestic financing options, and banks’ concerns over repossession in case of defaults have constrained outright purchase plans.
Granting infrastructure status could enable access to rupee-denominated financing, reducing exposure to foreign exchange fluctuations and curbing dollar outflows as fleet inductions accelerate. It would also open avenues for longer-tenure loans, participation by insurance companies, and broader access to domestic institutional capital.
One of the long-standing concerns among Indian lenders has been the repossession framework in case of airline defaults. Industry insiders indicate that the proposed framework may include clear guidelines requiring Indian-owned aircraft to be registered under the domestic regulatory system and governed by Indian law, thereby improving legal clarity and enhancing lender confidence.
Such measures are expected to lower risk premiums on loans and encourage banks to increase their exposure to aviation assets. Executives note that the policy could also support a gradual shift from operating leases to finance leases, enabling airlines to build asset ownership over time rather than relying exclusively on leased fleets.
Experts suggest that the infrastructure classification could extend beyond commercial passenger aircraft to include twin-engine helicopters deployed in offshore oil and gas operations, mining, and exploration activities, as well as business and corporate jets used by core infrastructure companies. They argue that aircraft and helicopter financing should follow a universal framework rather than being restricted to specific financial hubs such as GIFT City.
Globally, while aircraft are not universally classified as “infrastructure” in the traditional sense of roads or ports, several advanced aviation markets treat aviation assets as strategic infrastructure for financing and policy support purposes.
In the United States, aircraft financing benefits from robust asset-backed lending structures, strong repossession rights under federal law, and access to tax-advantaged mechanisms. The US also supports aircraft manufacturing and exports through credit agencies such as the Export-Import Bank.
In Europe, aircraft financing is facilitated through export credit agencies (ECAs) such as UK Export Finance, Bpifrance (France), and Euler Hermes (Germany), which provide guarantees and structured financing support. Ireland, one of the world’s leading aircraft leasing hubs, has built a highly supportive legal and tax framework that recognises aviation as a strategic economic sector.
Singapore has also developed itself as an aviation financing hub by offering tax incentives and regulatory clarity for aircraft leasing, treating aviation assets as critical to national connectivity and trade infrastructure. India’s proposed move would align the country with these global practices, where aviation assets are treated as strategic enablers of economic growth, connectivity, and industrial development, even if not formally labelled as infrastructure in every jurisdiction.
Granting infrastructure status to aircraft is expected to significantly change the risk perception of lenders and encourage Indian banks to actively enter aircraft financing. Once classified under infrastructure and aligned with Priority Sector Lending norms, aircraft loans would carry regulatory recognition, clearer repossession mechanisms, and improved legal backing — all of which reduce uncertainty for lenders. Lower risk premiums, longer repayment tenures and eligibility for structured rupee financing would make aircraft acquisition more viable for operators, while giving banks comfort through stronger asset security and policy support. With over 1,700 aircraft on order and growing demand from regional and business aviation segments, this shift could prompt domestic banks to move from a traditionally cautious stance to becoming proactive participants in aircraft finance, rather than leaving the space largely to foreign lessors and overseas funding institutions.
“As an experienced “Aviation Banker” I will like to say that an important and long-standing requirement of the Indian Aviation industry is that financing for the aircraft should be available from Banks and NBFC’s. So, granting Infrastructure financing status to aircraft financing will pave the way for easier access to capital to support the growth of Indian Aviation,” said Amit Mittal Aviation Expert who had a long banking career with relevant assignments of aircraft financing in a public sector bank earlier.
With India poised to become one of the world’s largest aviation markets, the classification of aircraft as infrastructure assets could mark a structural shift in the way aviation is financed domestically. By lowering financing costs, enabling rupee-denominated loans, strengthening repossession frameworks, and widening access to capital, the proposal could address long-standing bottlenecks in aircraft acquisition. If approved in the upcoming budget, the decision would signal the government’s intent to position aviation not merely as a transport service, but as a core component of national infrastructure and economic strategy.
