The missing link: Rethinking ship finance and leasing

By Admin

25 Jul, 2025

India's maritime aspirations are gaining momentum. As the country pushes to become a global shipbuilding powerhouse, it is investing in port infrastructure, shipyards, and manufacturing capacity. However, one critical component is still conspicuously underdeveloped ship finance and leasing. As Amit Oza insightfully points out, India’s shipbuilding future depends not just on steel and strategy but on smart capital.

Infrastructure Alone Won’t Sail the Ship

Despite policy pushes and the resurgence of interest in domestic shipbuilding, India's growth ambitions remain shackled by an outdated financial model. Conventional loans, project-specific funding, and government subsidies have long dominated the scene offering little long-term security to shipyards or confidence to investors.

India lacks a mature ecosystem for structured asset-based financing, where ships are treated as valuable assets with long-term commercial utility. This outdated mindset has left shipyards dependent on foreign partnerships or ad hoc funding, which often proves unsustainable.

Asset-Based Financing: The Critical Gap

Globally, maritime finance has evolved to treat vessels like income-generating, depreciating assets much like aircraft in aviation finance. Banks and financial institutions assess vessel utility, residual value, charter contracts, and scrap potential before offering funds. But in India, such practices remain rare. Financial institutions often lack the technical expertise to conduct vessel due diligence.

This calls for the emergence of a specialized financing framework, supported by professionals who can understand marine asset lifecycles. Adopting models where contracts, lease repayments, and residual value are core metrics can significantly improve the bankability of Indian shipbuilding projects.

Leasing Models: A Proven Global Playbook

In countries like China, South Korea, and Japan, leasing has become the lifeblood of maritime finance. It offers flexibility to shipowners and recurring returns to financiers. Leasing companies, backed by strong regulatory frameworks and financial incentives, help reduce capital pressure on shipbuilders and maintain a healthy order flow.

India has taken baby steps in this direction. Initiatives like GIFT City’s IFSC aim to position the country as a maritime leasing hub. However, success will require much more than ambition. India needs to attract global investors, adopt standardized leasing instruments, and foster international joint ventures with experienced players from maritime hubs like Singapore, the UAE, or Europe.

Building Institutional Competence: Knowledge as Capital

Ship financing is complex it’s not about lending for taxis or apartments. It demands deep technical understanding, from vessel specs and hull design to operational contracts and asset depreciation.

India must build institutional capacity across banks, NBFCs, and public insurers. A national-level Ship Finance Authority, in partnership with the Reserve Bank of India or the Ministry of Ports, could streamline project evaluations, derisk investments, and create specialized credit mechanisms for shipyards.

Creating maritime-specific financial training programs, offering tax incentives, and launching credit guarantee funds similar to Korea’s K-SURE can build the trust needed to attract domestic and foreign capital.

Demand Visibility and Strategic Collaboration

Finance flows where demand is visible. India’s policy vision Maritime India Vision 2030, coastal shipping promotion, and inland waterway modernization offers a strong base. But to unlock private capital, India must structure demand through lease-backed tenders and long-term offtake agreements.

States and ports should procure ferries, cargo vessels, and offshore support ships through Build-Own-Lease-Transfer (BOLT) or long-term leasing models, providing predictable returns to financiers while easing upfront fiscal burdens.

Moreover, India must embrace strategic foreign collaborations to tap into global expertise. Past attempts have shown promise but lacked consistency. With the right frameworks, partnerships with Korean design firms, Japanese lessors, and Middle Eastern finance arms could finally bear fruit.

Regulatory Reboot: Enabling Maritime Finance

Unlocking maritime finance in India calls for regulatory realignment. Key priorities include:

• Establishing a Ship Finance and Leasing Regulatory Framework
  
  

• Launching a Shipbuilding Credit Guarantee Fund
  
  

• Setting up a centralized ship asset valuation and registry
  
  

• Empowering IFSC-based ship leasing firms through tax and capital incentives
  
  

• Introducing finance training across banking and insurance sectors
  
  

Regulation must evolve to recognize finance not as a secondary enabler but as the core engine of maritime growth.

The Way Forward: Finance Smart, Finance Bold

India is at a turning point. With a growing fleet, a large coastline, and favorable policy intent, the time is ripe to scale. But no ship sets sail without fuel and for this industry, finance is the fuel.

If India wants to rival the shipbuilding prowess of East Asia, it must invest in a structured, scalable, and resilient financial ecosystem. This includes everything from sovereign leasing entities and IFSC-led instruments to smarter risk-sharing models and global joint ventures.

As one industry veteran said, “We need more than steel and subsidy. We need a financial nervous system connected, responsive, and built for scale.”

India has the ambition. Now it needs the capital intelligence to match.