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CS Professional · IFSCA - Regulations, Listing and Compliances · Banking Services and Finance Companies in IFSC

An Indian airline in Mumbai leases an aircraft from a finance company licensed in GIFT IFSC and pays rentals in US dollars. For the purpose of exchange control, how is the IFSC lessor treated in relation to the Indian airline?

The IFSC lessor is treated as a person resident outside India for exchange control purposes. The lease with the Indian airline is therefore a cross-border transaction with rentals in foreign currency, not an ordinary domestic rupee lease.

  1. AAs a person resident in India, so the rentals are a domestic rupee transaction
  2. BAs a person resident outside India, so the transaction is cross-border and in foreign currencyCorrect
  3. CAs a branch of the airline, so no payment is needed
  4. DAs a Reserve Bank of India department, so approval is needed for each rental

Explanation

Under the exchange control framework, an IFSC unit is treated as a person resident outside India for dealings with Indian residents. The rentals are therefore a cross-border foreign currency payment. Treating the lessor as resident in India confuses the IFSC's special status.

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