The ongoing conflict in Ukraine has clouded the economic growth outlook for India. Immediately after the outset of the conflict, the prices of imports of wheat, edible oil and fertilizers from Russia and Ukraine increased. Nevertheless, according to Dr. Rumki Majumdar of Deloitte, these external shocks will have a marginal impact on India's long-term outlook. It is expected that the Indian government's introduction of production-linked incentives, push towards Indian economic self-reliance and increased infrastructure spending in 2023 will fuel future growth. Indeed, the spillover effects of geopolitical conflicts could enhance India's status as a preferred alternative investment destination. The Indian economy is expected to grow at 8.3-8.8 per cent during the 2021-22 financial year and 7.5 per cent in 2022-23.

In terms of India's response to the conflict, India was among the list of countries that abstained in a UN vote to suspend Russia from the UN Human Rights Council. It has not imposed sanctions against Russia. Following Boris Johnson's recent visit to India, discussions over a UK-India trade deal are ongoing. More recently, German chancellor Olaf Scholz has invited Prime Minister Narendra Modi as a special guest to the G7 leaders' summit next month. Germany currently holds the rotating G7 presidency. Germany and India have also signed bilateral agreements centered around sustainable development that will result in India receiving EUR 10bn by 2030 to boost clean energy. These overtures are considered to be an attempt to shift India's longstanding alliance with Russia.


We appreciate the assistance of Sankar Swamy, Krishna Venkat, and Aparnaa Bhalotia of Anoma Legal with the following discussion of Indian law, regulation and practice.


The Indian legal system fuses English common law with civil law aspects and customary (religious) laws. This framework is governed under the Constitution of India, adopted in 1949.

Indian contract law is largely based on English contract law principles. Its key legislation, the Indian Contract Act of 1872, was passed under British governance. Indian company law also has its origins in the English Companies Acts and is today governed by the Indian Companies Act 2013.

Indian trust law differs from English law in that it does not recognise a distinction between legal and beneficial ownership. Accordingly, under Indian law, a trustee is the sole legal and beneficial owner of the trust property. However, it is possible for only the beneficial interest in trust property to be transferred under the Indian Trust Act of 1882. Indian law generally recognises trust arrangements under different legal systems.


  • Foreign purchasers of Indian debt are required to comply with the External Commercial Borrowing ("ECB") regulations. Additionally, Foreign Portfolio Investors registered with the Securities and Exchange Board of India ("SEBI") may invest in non-convertible debentures issued in India.
  • Assignment is generally the preferred method of transfer for fully funded loans, whilst novation is preferred for partially or fully unfunded loans.
  • Security may be granted either directly to the lender or in favour of a third-party security trustee who holds security for the benefit of the lenders from time to
  • Compliance with registration requirements is required to perfect the transfer of debt and ensure the enforceability of security.
  • Withholding tax on interest is charged at up to 20 per cent but may be reduced subject to reliance on applicable double taxation treaties. Stamp duty is also payable on the transfer of a In the case of foreign currency borrowings, external commercial borrowers could be subject to a beneficial withholding tax rate of 5 per cent.


The Indian debt market is highly regulated. Loans borrowed by Indian entities from non-residents must comply with the ECB regulations. The Reserve Bank of India ("RBI") delegates much of its regulatory responsibilities for ECB activity to commercial banks that hold an 'Authorised Dealer' status.

Non-Indian residents can also invest in Indian debt securities once registered as a Foreign Portfolio Investor with the SEBI in accordance with the SEBI rules and under the Foreign Exchange Management Act.

Any person who is a resident of a country complying with the Financial Action Task Force ("FATF") or the International Organization of Securities Commissions ("IOSCO") (other than individuals) may engage in an ECB. Further, Multilateral and Regional Financial Institutions where India is a member country are also permitted to engage in ECBs. Transferees of ECBs must comply with the above requirements.


A transfer, whether by assignment or novation, of an ECB may need to be compliant with the Master Direction on External Commercial Borrowings, Trade Credit, and Structured Obligations (the " Guidelines").

In broad terms, the Guidelines prescribe the categories of Indian borrowers and foreign lenders which may enter into ECB arrangements, as well as parameters such as the minimum maturity, permitted uses and cost ceilings (being interest and other costs) of such arrangements. The ECB framework has two classifications:

  • Foreign currency denominated ECB; and
  • INR denominated

The framework applies differently (in respect of certain requirements such as the form of ECB, eligible borrowers and cost ceilings) depending on the category within which the ECB falls.

The ECB regulations have more liberalized requirements for startups registered as such with the Indian government.

Assignment is generally preferred for the transfer of fully funded loans whilst novation is preferred for partially or fully unfunded loans.

Notice of assignment is often given to the borrower but not required at law. Furthermore, there are registration requirements. If the underlying security of the loan being transferred does not include immovable property (i.e. real estate), filings must be completed with the Registrar of Companies. If the underlying security does include immovable property, filings must be made with the Sub-Registrar of Assurances and the Registrar of Companies to ensure that the security for the loan is perfected and enforceable.

Participation agreements constitute legal and valid obligations in India. However, such agreements are less prevalently used in a commercial context.


As set out above, Indian law recognizes the concepts of trust and agency. These concepts are widely applied in commercial lending transactions in India.

Security may be granted either directly to the lender or in favour of a third party security trustee who holds security for the benefit of the lenders from time to time.

If the security is created in favour of the lender directly, then it must be assigned by the existing lender to the new lender or recreated in favour of the new lender by the borrower. If the security is created in favour of a security trustee, then the security will not have to be assigned separately.

In the event that a security trustee or agent becomes insolvent, any property held on trust for a third party would not fall into the estate of the trustee or agent under the Insolvency and Bankruptcy Code.


Withholding tax on interest is charged in India at rates of up to 20 per cent. However, India has a wide network of double taxation treaties which could reduce the amount of tax withheld to 10 per cent or less in certain circumstances. Payments made to ECB holders could be subject to a beneficial withholding tax rate of 5 per cent in the case of foreign currency borrowings.

Stamp duty is payable on the transfer of a loan, with rates varying under local state laws. In most states the amount payable is capped at INR 100,000 (approx. GBP 1,090). The payment of stamp duty is a requirement before any associated security can be registered.

Investors should consider Indian tax advice in relation to any particular transaction.


Any power of attorney needs to be notarised. Agreements in general do not require notarization.



On 20 April 2022, Mumbai-based Tata Steel declared it would stop doing business with Russia and importing Russian coal for its steelmaking operations.

Tata Steel was reported to be the largest Indian importer of Russian coal in the first quarter of the year. It is also one of the biggest steel producers in Europe. A spokesman said "Tata Steel does not have any operations or employees in Russia. We have taken a conscious decision to stop doing business with Russia." It noted that all of the company's steel manufacturing sites in India, the UK and the Netherlands have sourced alternative supplies of raw materials to end dependence on Russia. Its statement followed a declaration by Infosys, one of India's largest technology companies, that it had started moving operations out of Russia.

India relies on coal for 70 per cent of its electricity generation. India had increased Russian coal imports prior to the outbreak of the Russian-Ukrainian conflict because competing Australian imports were too expensive.

Although the need for Russian coal is likely to increase, analysts say potential payment issues stemming from international sanctions and the steep cost of shifting the commodity long distances have reduced purchases. According to the Indian embassy in Moscow, India and Russia want to increase bilateral trade to USD 30bn by 2025 from USD 8bn in 2021. Indeed, Russia and India have reportedly been discussing a "rupee-rouble" exchange scheme that would allow trade to continue despite western sanctions restricting international payment mechanisms. Such a scheme is yet to emerge.


The state-owned insurer, LIC, is to participate in an initial public offering open for subscription from Wednesday 4 to Monday 9 May 2022. LIC is the country's oldest and largest life insurance firm. It was formed on 1 September 1956 by merging and nationalising 245 private life insurance companies.

Initially, New Delhi was to close the deal before the last fiscal year's end on 31 March and it was anticipated the float would raise between USD 6bn and USD 8bn. However, the Indian government has now revised this to a 3.5 per cent stake for USD 2.74bn. This comes to an overall equity value of less than USD 80bn.

Regardless, even with the reduced size, the LIC initial public offering will be the biggest in the history of India's capital markets. Ajay Mahajan, Chief Executive of rating agency CARE, has referred to India's sale of the stake in LIC as India's " Aramco moment". LIC's assets under management of USD 495bn are more than three times that of other life insurers in India. According to Credit Suisse, it issues almost three-quarters of all individual insurance policies in India. On listing, LIC is expected to become India's third largest company by market valuation.

The case for investing in LIC is the company's huge reach across India, combined with the expectation that a rising middle-class in the world's second most populous nation will want its core life insurance, pensions and other long-term savings products. It also sells health insurance. However, rivals such as SBI Life and HDFC Life have eaten away at LIC's market share in recent years. LIC's prospectus notes that the additional easing of restrictions on overseas investments creates an "impending threat of foreign players entering the market."

Questions remain as to whether the Indian market is ready to welcome an initial public offering on the scale of LIC. Last year, Indian payments company Paytm struggled after listing.


HDFC Bank, India's third-biggest listed company by market capitalisation, and parent Housing Development Financing Corporation Limited, one of India's biggest mortgage lenders, are to merge to create a finance entity with a market capitalisation of USD 185bn and an asset base of USD 340bn. According to Fitch Ratings, it will be double the size of its closest rival ICICI Bank. This would be the largest merger in India's history.

The merged entity will be positioned to capitalise on the country's economic recovery and rising demand for credit. The merger will also expand HDFC Bank's mortgage portfolio and enable it to sell more home loans as the company looks to take advantage of India's post-pandemic recovery.

The merger occurs within the context of the Reserve Bank of India's encouragement that shadow lenders such as HDFC convert into banks. India is expected to introduce regulations in October for large non-bank financial companies after collapses in the sector led to millions of depositors losing their savings.

According to analysts, the merger could motivate a series of deals in the country's banking sector, as competitors hunt for acquisitions to close the gap with HDFC Bank. However, it is also possible that regulators block the deal due to concerns about the integration of HDFC's insurance subsidiaries. Mergers in India can be a long process requiring approval from shareholders, the Reserve Bank of India, the Securities and Exchange Board of India, the Competition Commission of India and the Insurance Regulatory and Development Authority of India.

In light of this merger, non-bank financial companies may rethink industry positioning.


The Indian crackdown on Chinese technology groups has resulted in the blacklisting of more than 200 Chinese apps.

This crackdown occurs within the context of escalating political tensions between India and China following a 2020 border dispute. In April 2020, India and China accused each other of trespassing the Line of Actual Control. In June, hand-to-hand combat at the border resulted in a mobilisation of border troops. China is now building a bridge across the Pangong Lake in the frontier region of Ladakh in Indian-administered Kashmir. On 25 March, China's foreign minister, Wang Yi, visited India with the aim of normalizing relations so that India attends the BRICs summit in China.

However, as recently as February 2022, Gao Feng, the spokesman for the Chinese Ministry of Commerce complained that Indian authorities' repressive measures against Chinese companies and related products in India were damaging the legitimate rights and interests of Chinese companies. In this context, the Financial Times reported on 3 May 2022 that Indian anti-money laundering regulators have taken control of the bank accounts of Chinese smartphone maker Xiaomi in India after accusing it of breaching local foreign-exchange laws. They have seized INR 55.5bn. Regulators claim that Xiaomi's local unit falsely labelled remittances to three offshore entities.

Xiaomi is considered to be the most successful smartphone brand in India. It accounts for a quarter of all smartphone shipment revenue. The Indian smartphone market is considered crucial for growth. About 40 per cent of the population still do not own a smartphone. Sales rose 27 per cent last year, a record pace given that the pace slowed globally. The average selling prices of phones have also increased as India's middle class grows.

India's continued crackdown could contribute to the falling share prices of Chinese technology companies targeting the Indian market however may open up opportunities for US technology.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.