 "tariff, trade")
To support exporters against tariffs imposed by the United States (US), especially those in micro, small, and medium enterprise (MSME) clusters, banks are devising strategies for these firms to overcome the challenge.
Commercial banks are offering interest rate discounts, flexible repayment options, and ensuring better access to export insurance and credit guarantee schemes. They are also organising workshops to encourage diversification into various markets.
The 50 per cent tariffs, which come into effect from August 27, have prompted officials to take proactive measures to mitigate the impact, said senior bankers.
In addition to easing credit access and temporary interest concessions, banks are also considering waivers on various administrative fees. These include loan processing, forex handling, and collection charges — moves aimed at minimising operational costs for affected businesses.
“We are directly talking to exporters and looking at how these tariffs will actually impact businesses. This, in turn, is expected to slow down loan demand from exporters,” a senior executive from Indian Bank said.
“We have enhanced credit access under export insurance and credit schemes. The focus is more on MSME clusters which are export-oriented,” the executive added.
US President Donald Trump had initially imposed 25 per cent tariffs on Indian exports to the US followed by additional 25 per cent.
Moody’s Analytics — in its latest report — mentioned that the combined impact of 50 per cent tariffs on Indian exporters would be significant, as they will reduce demand from the US substantially.
The report added that some firms in these countries may be willing to slash prices to maintain volumes, but this will affect performance through lower margins, a squeeze on wages and investment.
Further, given that tariffs are expected to remain in place for the remainder of Trump’s presidency, the drag on growth, particularly on investments and exports, will be notable, it said.
Bankers fear this will significantly reduce the loan demand from MSMEs as the majority in the sector is involved in export-oriented business.
Most MSMEs in the country are engaged in businesses such as textiles and garment exports, gems and jewellery, carpets, leather goods, chemicals and food processing, which are heavily reliant on the US market.
“Mostly, MSMEs are engaged in exporting textiles and exports to the US are significant. Hence, the first step in order to release stress is to export to other countries. Further, the focus is on providing assistance to fill the mismatch in their cash flow so that business can continue running,” a senior executive at a private bank said.
Senior banking executives said they are asking exporters to look out for markets such as West Asia, Africa, and Europe in order to decrease the reliance on the US market.
A senior executive at Tamilnad Mercantile Bank said, “The bank, with the help of its relationship managers, is conducting sessions with exporters, reviewing contracts and shipments. The bank is prioritising their working capital needs. Whenever and wherever required, we will provide all suitable options, including waivers and flexible repayments methods, among others.”
With the date of tariffs coming closer, banks are devising different strategies to ease working capital needs of exporters thereby preventing any impact on banks’ loan business, bankers said.
