India to ask banks to take up ships as collateral to boost ship-making & financing

In a first, Indian banks are being pushed to accept ships as collateral for shipbuilding loans – a bold move to turbocharge India’s maritime sector, senior officials from the Ministry of Ports, Shipping and Waterways (MoPSW) told businessline.

With a policy push being in the works, plans are afoot to finalise the contours of the Maritime Development Fund and Shipbuilding Building Financial Assistance Policy 2.0.

The Ministry also wants to ensure Indian banks start accepting ships as collateral in order to push manufacturing activities here and get the ecosystem in-place as policy intervention happens.  

In case of shipping finance here in India, very few banks and financial institutions have the necessary expertise or infrastructure to appraise such projects, sources said. Most other commercial banks have shown considerable skepticism in taking up exposure in shipping, citing associated risks too. 

Financing Concerns 

Incidentally, one of the concerns raised by banks and financial institutions have been the recovery of the asset – in this case the ship – following a loan default. 

 Sources, said, India is looking at the Brussels Arrest Convention rules (relating to the Arrest of Sea-Going Ships) that establishes rules for the arrest of ships in relation to maritime claims . It aims to provide a legal framework for securing these claims by allowing for the arrest of a ship. 

Although, India is not a signatory, the principles of these conventions are considered part of India’s common law. This means that Indian courts can use the principles of these conventions to resolve maritime disputes, including ship arrest. 

“So we are working to ensure that Indian banks accept the ship as a security or collateral; and ship building porjects move forward. In most cases banks seek other assets as security like real estate or something else, which has been a deterrent for companies. As the infrastructure status comes in, some of these financing issues will be sorted out too,” the official said. 

Globally, a few banks like Christiana Bank, ABN Amro, Citibank have specialisation in Ship Financing practices. 

India, in its Budget this fiscal, had said, “large ships above a specified size will be included in the infrastructure harmonized master list (HML)”. This will make them eligible for benefits such as easier access to long-term financing and tax incentives. Policy details are in the works, sources said. 

Push for Shipbuilding 

According to the official, land for shipyards have been identified in three states – Andhra Pradesh, Gujarat and Tamil Nadu. 

Moreover, Japanese shipping lines, Korean ship-maker and a Rotterdam-based ship-maker have expressed interest in tapping into ship-building opportunities here. 

Discussions are underway and some of these companies are exploring tie-ups with Indian ship-yards too.

Published on May 11, 2025

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