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A loan license in pharma is a government-issued permission that allows a company or individual to manufacture drugs using another licensed manufacturer’s facility — without owning a factory. Governed by Rule 69A of the Drugs and Cosmetics Rules, 1945, it is issued by the State FDA in Form 25A (non-Schedule C drugs) or Form 28A (Schedule C & C1 drugs). It is ideal for pharma startups, traders, and brand owners who want to legally launch medicines without heavy capital investment.
Why Loan License in Pharma Matters
Starting a pharmaceutical manufacturing business in India is expensive. Building a GMP-compliant factory can cost crores of rupees — and that’s before you buy a single machine. For most pharma startups, traders, and brand owners, this is simply not feasible from day one.
That’s exactly where the concept of a loan license in pharma becomes a game-changer.
Simply put, a loan license lets you manufacture and sell drugs legally — using someone else’s licensed factory. You don’t need to own a plant. You don’t need to hire a full production team. You just need the right documents, a willing host manufacturer, and approval from your State FDA.
If you’re a pharma entrepreneur, brand owner, or exporter trying to understand this route, this guide walks you through everything — from the loan license meaning and eligibility to exact forms, step-by-step process, and common mistakes to avoid.
At traccglobal, we work with pharma businesses across India on precisely this kind of regulatory support, and we’ve put together this guide based on real-world experience.
What Is a Loan License in Pharma?
Rule 69A of the Drugs and Cosmetics Rules, 1945 defines a loan license as: ‘a license issued to an applicant who intends to avail of the manufacturing facilities owned by a licensee.’ In simpler terms — you get a license to manufacture drugs at another company’s approved facility, under your own brand name.
The term ‘loan’ here doesn’t mean borrowing money. It means you are ‘loaning’ or borrowing the manufacturing infrastructure of a registered facility. You are the loanee (the license holder), and the factory you use is the host manufacturer or licensee.
The key thing to understand: this is a completely legitimate, government-regulated route for drug manufacturing in India. It’s not a shortcut — it still involves proper inspection, documentation, and compliance with the Drugs and Cosmetics Act, 1940.
Who Is a Loanee and Who Is the Host?
- Loanee (Applicant): The company or individual applying for the loan license. They own the brand, formulations, and packaging. They do not own the factory.
- Host Manufacturer: The licensed manufacturing unit (holding a valid Form 25 or Form 28 license) that provides its premises, equipment, and technical staff for production.
How Does a Loan License Work in India?
The loan license in pharma system in India is governed jointly by the Central Drugs Standard Control Organisation (CDSCO) and individual State Drug Licensing Authorities. The license is issued at the state level — meaning you apply to the State FDA of the state where the host manufacturing facility is located.
Here’s how the arrangement works in practice:
- The loanee and the host manufacturer enter into a formal manufacturing agreement.
- The host provides its facility, trained technical staff (Qualified Person/Pharmacist), and GMP-compliant infrastructure.
- The loanee provides raw materials, packaging materials, and product formulations.
- Production happens at the host’s factory but the finished product is sold under the loanee’s brand name and drug license number.
- The loanee is fully responsible for product quality, labeling, and regulatory compliance.
Who Needs a Loan License in Pharma?
Not every pharma business needs to build its own factory. A loan license is the right fit if you fall into any of these categories:
- Pharma Startups: New entrants who want to launch branded medicines without heavy infrastructure investment.
- Pharma Traders & Distributors: Established traders who want to move into manufacturing and launch their own product range.
- Exporters: Companies exporting to regulated and semi-regulated markets who need a legally valid Indian drug manufacturing license.
- Ayurvedic / OTC Brand Owners: Entrepreneurs launching wellness, OTC, or nutraceutical products who want regulatory cover.
- Generic Pharma Companies: Businesses looking to scale their product portfolio without expanding their own factory capacity.
Eligibility Criteria for a Loan License
The licensing authority checks the following before issuing a loan license:
- The host manufacturer must hold a valid, active manufacturing license (Form 25 or Form 28) for the same drug category being applied for.
- The host facility must have adequate equipment, technical staff, and GMP compliance as per Schedule M of the Drugs and Cosmetics Rules.
- A valid manufacturing agreement between the loanee and the host must be in place.
- The loanee must have a registered business entity in India (Pvt Ltd, Partnership, Proprietorship, LLP, etc.).
- The loanee must designate a technically qualified person (Pharmacist or equivalent) for oversight.
Documents Required for a Drug Manufacturing Loan License
Preparing the right documents is half the battle. Missing even one paper can delay your application by weeks. Here’s a comprehensive list:
Documents From the Loanee (Applicant)
- Aadhaar Card and PAN Card of all directors / partners / proprietor
- GST Registration Certificate
- Certificate of Incorporation (for companies) or Partnership Deed / Proprietorship proof
- Memorandum and Articles of Association (for Pvt Ltd / LLP)
- Registered office proof (rent agreement or ownership document)
- Form 20B (Declaration of qualified person) and Form 21B (Undertaking)
- Qualification certificates of the technical person (Pharmacist / B.Pharma / M.Pharma)
- Board Resolution authorizing the application (for companies)
- Loan License Agreement signed by both parties
- List of drugs / formulations proposed to be manufactured
Documents From the Host Manufacturer
- Valid manufacturing license copy (Form 25 or Form 28)
- Site Master File (SMF)
- Qualification certificates of technical staff
- GMP compliance certificate or latest inspection report
- Equipment list with calibration records
- Stability study data for applicable products
- Product approval copy (if product-specific approval is needed)
- No Objection Certificate (NOC) from the host manufacturer
Step-by-Step Process to Get a Loan License in India (2026)
Step 1-Identify & Finalize the Host Manufacturer
Find a State FDA-approved manufacturing facility that holds a valid Form 25 (or Form 28 for Schedule C drugs) and is willing to manufacture your products. Due diligence is critical here — inspect the facility, check their compliance history, and confirm GMP status.
Step 2- Sign the Manufacturing Agreement
Execute a legally binding manufacturing or loan license agreement between you (loanee) and the host manufacturer. This document is mandatory for the application and must mention product list, responsibilities, quality parameters, and duration.
Step 3- Prepare & Compile Application Documents
Gather all loanee-side and host-side documents. Fill in the correct application form — Form 24A for non-Schedule C drugs, or Form 27A for Schedule C / C1 drugs. Ensure all forms are signed, stamped, and up to date.
Step 4- Submit to State Drug Licensing Authority
Submit the application (online via the state’s drug licensing portal or offline, depending on the state) to the State Drug Controller’s office where the host factory is located. Pay the prescribed government fee at this stage.
Step 5- Pre-Inspection Document Scrutiny
The licensing authority reviews all submitted documents for completeness and accuracy. If queries are raised, you typically have 30 days to respond with corrections or additional information. Delays at this stage are common if documents are incomplete.
Step 6- Site Inspection by Drug Inspector
A Drug Inspector visits the host manufacturing facility to physically verify premises, equipment, hygiene standards, technical staff qualifications, GMP compliance, and adherence to Schedule M. This is a joint inspection by Central and State government inspectors.
Step 7- Reply to Observations (If Any)
If the inspector raises observations or deficiencies, you must respond and rectify them promptly. Corrective Action and Preventive Action (CAPA) documentation may be required for serious non-compliance findings.
Step 8- License Issuance
Once all checks are satisfactory, the State FDA issues the loan license — in Form 25A for non-Schedule C drugs or Form 28A for Schedule C & C1 drugs. You can now legally begin commercial drug manufacturing at the host facility.
Key Forms Involved in a Loan License Application
One of the most confusing parts for applicants is understanding which form to use and when. Here’s a clear breakdown:
What Are Schedule C Drugs? (Why It Matters for Loan Licensing)
Under the Drugs and Cosmetics Rules, 1945, drugs are categorized into different schedules. Schedule C drugs are a special category that includes biological and parenteral preparations that require stricter manufacturing controls. These include:
- Sera and vaccines
- Toxins and antigens
- Biological products for therapeutic use
- Parenteral preparations (injectables)
- Hormones and hormone-like substances
- Radioactive pharmaceutical preparations
Why does this matter? Because the forms you use, the fee you pay, and the scrutiny level you face all depend on whether your product falls under Schedule C or not. Always check your product’s schedule classification before beginning the loan license application.
Loan License vs Third-Party Manufacturing: What's the Difference?
These two terms are often used interchangeably in the Indian pharma industry, but they are not exactly the same thing. Here’s a clear comparison:
| Parameter | Loan License | Third-Party Manufacturing |
|---|---|---|
| Definition | Legal permission to manufacture drugs at another's licensed facility, under a State FDA-issued license | A commercial arrangement where one company contracts another to manufacture its products |
| Regulatory Basis | Formally defined under Rule 69A, Drugs & Cosmetics Rules, 1945 | Broader commercial practice; can involve loan license or contract manufacturing |
| License Required | Yes — applicant (loanee) gets their own Form 25A or Form 28A | The manufacturer's own license is used; client may or may not hold a separate license |
| Brand Ownership | Loanee owns and markets the product under their brand | Depends on the agreement; can be brand owner or generic label |
| Quality Responsibility | Shared between loanee and host, but loanee is legally responsible | Typically with the manufacturer; contractually defined |
| Who Applies to State FDA | The loanee (applicant) applies for their own license | The manufacturer already holds the license |
| Applicable Forms | Form 24A / 27A (application); Form 25A / 28A (license issued) | No separate regulatory form — manufacturer's existing license applies |
| Best For | Startups, brand owners, exporters who need their own drug license | Established brands expanding range through contract production |
In practical terms: a loan license is a type of third-party manufacturing arrangement — but with the key difference that the brand owner holds their own government-issued drug manufacturing license. This gives them greater legal standing, export eligibility, and credibility with institutional buyers and hospitals.
Timeline and Cost: What to Expect in India (2026)
How Long Does It Take?
The loan license timeline in India typically ranges from 60 to 120 working days from the date of complete application submission. Here’s a rough breakdown:
- Document preparation: 2–4 weeks (depends on readiness)
- Pre-inspection scrutiny by authority: 3–6 weeks
- Site inspection scheduling & inspection: 4–8 weeks
- Observation reply & clearance: 2–4 weeks (if observations are raised)
- License issuance: 1–2 weeks after final clearance
States with online licensing portals (under the One Nation One Drug Licensing System / ONDLS) tend to process applications faster. States still using offline/manual processes may take longer.
What Are the Costs?
The cost of obtaining a loan license in India varies based on several factors:
- Government fees: ₹200 per category for Form 24A (non-Schedule C); ₹600 for Form 27A (Schedule C drugs) — additional charges per product item apply
- State-specific fee variations: Each state may have different rate cards — check with your State FDA
- Professional/consultant fees: Variable, based on document complexity and number of products
- Inspection fees: Applicable in some states as a separate charge
- Total all-in cost range: Typically ₹25,000 to ₹2,00,000+ depending on state, product category, and consultant support
Common Mistakes That Delay Loan License Approval
Based on real application experience across Indian states, these are the most frequent reasons for delays or rejections:
- Incomplete manufacturing agreement: The agreement doesn’t mention product list, quality roles, or testing responsibilities clearly.
- Wrong form selection: Applying in Form 24A for Schedule C drugs (which require Form 27A) and vice versa.
- Unqualified technical person: Designating someone without the required pharmacy qualification under Rule 49 of the Drugs and Cosmetics Rules.
- Host manufacturer’s license is expired or under suspension: Always verify the host’s license validity before applying.
- Mismatch between products applied for and host’s manufacturing scope: If the host doesn’t have the capability or approval for your product type, the application will fail inspection.
- Missing Form 20B or Form 21B: These declarations are mandatory but often overlooked by first-time applicants.
- No product-specific approvals for new drug molecules: Some products require prior CDSCO approval before a manufacturing license can be granted.
Duration and Renewal of a Loan License
As per recent amendments to the Drugs and Cosmetics Rules, 1945, Form 25A licenses (loan licenses) are now valid perpetually — provided the licensee pays the licence retention fee every five years from the date of issue.
If the retention fee is not paid on time, a late fee of 2% of the licence fee per month is levied for up to six months. Continued non-payment can lead to license cancellation. Facility compliance inspections by the licensing authority are conducted at least once every three years.
