Lenders are asking borrowers more pointed questions when vetting new export financing proposals or renewals of such funding, the people said. They added that some export orders are being put on hold while trade negotiations play out between New Delhi and Washington
Govt plans credit guarantees for small firms, exporters hit by US tariffs
Mumbai/New Delhi : About 55 per cent of India’s total merchandise exports to the US will be subject to 25 per cent reciprocal tariff, Minister of State for Finance Ministry Pankaj Chaudhary said on Monday.
In a written reply to a question in the Lok Sabha, Chaudhary said the government attaches utmost importance to protecting and promoting welfare of farmers, entrepreneurs, exporters, MSMEs, and will take all necessary steps to secure our national interest.
“A combination of different factors, such as product differentiation, demand, quality, and contractual arrangements, would determine the impact on India’s exports,” he said.
The minister was replying to a question about whether the government has made any assessment on the impact of the USA’s reciprocal tariff threat on Indian goods.
“It is estimated that around 55 per cent of the total value of India’s merchandise exports to the US will be subject to this reciprocal tariff,” Chaudhary said.
He said a reciprocal tariff of 25 per cent is proposed to be imposed on certain goods exported from India to the US starting from August 7.
Indian banks are increasing scrutiny of new loan applications from exporters by asking about exposure to the American market and contingency plans for coping with US President Donald Trump’s steep tariffs, according to people familiar with the matter.
Bloomberg News spoke to officials at five large Indian lenders who said they’re assessing the financial ramifications of the punitive levies on their clients, especially those in the export-dependent textile, gem and jewelery sectors. They all spoke on the condition of anonymity, as the information is not public.
Lenders are asking borrowers more pointed questions when vetting new export financing proposals or renewals of such funding, the people said. They added that some export orders are being put on hold while trade negotiations play out between New Delhi and Washington.
The move comes after Trump doubled tariffs on India-made items in the space of a week, with the additional levy effective by Aug. 27, bringing the cumulative tariff to 50%. Businesses worry that this will severely disrupt shipments to the US by making Indian exports prohibitively expensive.
Meanwhile, India is planning to provide credit guarantees for loans overdue up to 90 days to small businesses and exporters, amid higher tariffs imposed by the U.S., two government sources told Reuters.
The federal finance ministry has proposed to provide 10-15% credit guarantees to banks for advancing loans to stressed small businesses, with turnover up to Rs 500 crore, that fall under the Reserve Bank of India’s (RBI) so-called special mention accounts (SMA), the sources said.
Loans that have not been repaid for 0-90 days fall under RBI’s SMA 0-2 category, but are not classified as non-performing assets.
India’s small businesses still struggle with limited access to timely and adequate formal credit.
The government will allocate about Rs 4000 crore for providing guarantees to banks, both the sources said.
The scheme is designed for firms that are stressed due to external factors “beyond their control”, and the eligibility criteria is being firmed up, according to the sources.
The criteria will cover small exporters who are currently facing uncertainties due to higher tariffs imposed by the U.S., a key market for Indian exports, the second source said.
The government estimates that about 55% of its merchandise exports to the United States will be subject to the tariff imposed by President Donald Trump’s administration.
The finance ministry did not immediately respond to an email seeking comment.
Separately, the Indian government is preparing a scheme to provide term loans for small exporters that would be backed by a government guarantee of a maximum 70-75%, the second source said. The scheme was announced by India’s finance minister in the budget for 2025/26.
India’s Commerce Minister Piyush Goyal told Parliament late last month that the federal government is engaging with exporters to assess the impact of tariffs and will take “all necessary steps to secure and advance our national interest.”
The government is working on measures to boost India’s exports, including targeting 50 countries in regions such as the Middle East and Africa, amid the heavy tariffs imposed by the US on Indian goods, an official said on Monday.These 50 countries account for about 90 per cent of India’s exports.
The official said that the commerce ministry is working on four pillars including export diversification, import substitution, and export competitiveness.
“Detailed analysis is underway on these pillars. The ministry is working product by product,” the official said.
The commerce ministry was already focusing on 20 countries and now 30 more have now been included in the strategy.
The Gem and Jewellery Export Promotion Council is seeking support such as finance relief and duty drawbacks.
Other requests include deferment of interest on working capital facilities by six months, 90-day pre-shipment and penalty-free loan payment extensions and a freeze on downward revisions of credit ratings, Kirit Bhansali, the trade group’s chairman, said in an Aug. 7 statement.
The industries hit hardest — they are also among the most labor-intensive — have asked the Narendra Modi-led government to introduce measures to reduce the pain from the new trade barriers.
Indian lenders are concerned the trade war will create new balance sheet stress and stoke painful memories of the country’s distressed debt problem a few years back.
Some of their key queries, according to the people, pertain to cash flows, business continuity plans and burden-sharing efforts with other stakeholders such as distributors.
Some banks have begun to identify the most vulnerable clients internally by checking on financial parameters such as the percentage of revenue coming from the US, said two people Bloomberg News spoke to. The exposure to the highest-risk borrowers due to US levies isn’t currently that worrisome, they added.
Rollback Hopes
Most of the exporters these bankers have spoken to about the trade issue said they’re hopeful for a partial rollback of the US tariffs.
Indian exporters have already started redrawing strategies to deal with the unexpected levies through measures such as expanding in other markets, shifting output from India to elsewhere and exploring acquisitions in the US.
Some cash-rich exporters can sustain losses for a year or two but they worry about longer-term loss of business to rivals in Bangladesh and Pakistan, a person said. These neighboring nations face lower US levies than India.
Rating Actions
Rating companies haven’t taken any action yet on exporters’ creditworthiness. However, borrowing companies are worried and seeking government assistance to prevent any slip in ratings that will spike the cost of funding.
Other Indian business representatives want to see more liquidity in the banking system to offset damage from the US tariffs.
India’s government should push “banks to lower the rate of interest” to keep businesses afloat, said Rahul Mehta, director at Mumbai-based Creative Garments Pvt.
Removal of import duties on raw materials should also help, Mehta said, calling for a government response akin to Covid-era emergency policies.
India’s exports remained flat at USD 35.14 billion in June due to global economic uncertainties, while the trade deficit narrowed to a four-month low of USD 18.78 billion during the month.
During April-June 2025-26, exports increased 1.92 per cent to USD 112.17 billion, while imports rose 4.24 per cent to USD 179.44 billion.
Agencies