- Leasing in India
- Contents of Lease Agreement
- Advantages of Leasing
Leasing could be a distinctive variety of intermediate-term funding. Given the economic process context, corporations ought to go international. For this, they need to diversify, expand and modernize their business. This can need an enormous quantity of investment. Entrepreneurs currently don’t want to dam their investment in plants and machinery. Instead, they give the impression of being for various suggests that of funding the comes. Additionally, to debt and equity funding, leasing has emerged as a 3rd necessary supply of intermediate and long funding for company enterprises recently.
Leasing in India
Leasing business in India is of recent origin. It was pioneered in 1973 once for the primary time ‘Leasing Company of India’ originated in Madras. For nearly seven years in the country, this company was the only real leasing company.
In 1980 another leasing company referred to as “20th Century Leasing” came into existence. Each of these leasing corporations was promoted by management—qualified professionals from the town bank.
Thereafter, a virtual explosion within the leasing business was noticeable. In 1981 four organizations, viz., Shetty Investment and Finance, ‘Jaybharat Credit and Investment’, ‘Motor and General Finance’, and ‘Sundaram Finance’ joined the leasing business primarily for taking advantage.
The leasing business entered the third stage within the growth introduced in late 1982 once various monetary establishments and business banks either started leasing or proclaimed plans to try and do this. ICICI embraced leasing activity in 1983 wherever once the trickle before long developed into flood and leasing became the new gold mine.
This was conjointly the time once the profit performance of the primary twenty-four corporations had been created a public was thus fascinated with attracting more corporations in the leasing business.
In the meanwhile, International Finance Corporation proclaimed its call to open four leasing joint ventures in India. To feature in the leasing boom, the Finance Ministry proclaimed strict measures for some time for investment corporations on stock exchanges, which created several investment corporations to flip long into leasing corporations. Foreign banks in India notably Grindlays did commendable add selling the leasing plan.
At present, there are three hundred leasing corporations within the country. Aside from these, several corporations engaged in alternative businesses are leasing out primarily to use their investible surplus in tax benefits.
Over the amount, 1980-88 gross chartered assets of those corporations distended by Rs.700 crores indicating the extent to that leasing corporations have vie a big role in the quality formation.
This is a basic undeniable fact that needs recognition and encouragement by the government, it’s most intriguing to notice that the leasing business is being singled out for discriminatory practices.
Leasing is returning more matured in India as is proven by the fantastic growth of the leasing business by over one hundred pc in recent few years. Against solely Rs. 3,000 large integers of lease deals done throughout 1993-94, the excitement within the leasing business puts leasing volume in 1994-95 at near to Rs. 7,000 crores.
Contents of Lease Agreement
- The proprietor renter and also the quality
- The quantity of the lease rent beside alternative conditions of payment like time, mode, etc.
- The terms and conditions relating to the payment of repairs and maintenance of the quality and also the lessee’s responsibility for the payment of such charges.
- Restrictions, if any place by the proprietor on the employment of the chartered quality by the renter.
- Provisions relating to renewal cancellation of a lease or relating to coming of kit on termination of the lease amount.
- Variations in lease rentals in specific conditions like variations in bank rates depreciation etc. The proprietor and renter prepare an agreement on top and sign it.
Advantages of Leasing
(i) Regular financial gain: Lessor gets assured income throughout the amount of lease while not transferring the possession of the quality to the renter.
(ii) High profitableness: Leasing is very profitable since the speed of come is that the lease rental is above the interest due to funding the quality.
(iii) Growth and growth: An enterpriser won’t pay loads of cash getting the quality. He will utilize the funds for any growth of the business.
(iv) Tax deduction: Lease rental is deductible from the non-exempt financial gain of the renter. The proprietor has the good thing about depreciation in respect of chartered assets.
(v) Economical: Leasing as a supply of funding is cheaper than several alternative sources of finance. The renter will use the quality and earn profits while not financing cash within the quality.