Kolkata: The Indian banking industry remains cautious as the 50% US levy takes effect, but leading bankers do not see the tariff posing any significant threat to credit growth or asset quality.
Banks' export credit outstanding stood at ₹12,021 crore at the end of May, less than 0.1% of the total bank credit of ₹183 lakh crore, Reserve Bank of India data showed.
Hence, from a banking standpoint, the overall impact will be limited, barring client-specific stress, senior bankers said. They also expect the government to extend fiscal relief to affected exporters.
About 13% of India's merchandise exports will face the elevated 50% US tariff. While 25% of the duty came into effect on August 7, the balance became operational Wednesday.
"There are four, five sectors that may face sharper impact. But these sectors, from the banking system's point of view, pose no systemic risk, as exposures here are not very large," State Bank of India chairman CS Setty said during the bank's post-earnings analysts call on August 8.
Banks offer working capital loans, or pre-shipment credit, to exporters for buying raw materials and producing or packaging goods. They also extend post-shipment credit once goods are dispatched to ease cash flow gaps in the payment cycle.
The five sectors most vulnerable to the higher US tariff are electrical machinery, gems & jewellery, textiles, machinery & mechanical appliances and agricultural products. Of these, gems and jewellery carry the largest US exposure at about $10 billion, Crisil said. The 50% tariff will also affect $19 billion worth of exports across textiles, chemicals, auto components and seafood, the agency added.
"We are monitoring things closely. We remain in touch with every affected customer, particularly those with more than 10% of their business in the US," said CSB Bank managing director Pralay Mondal. "Some support from the government is likely. Exporters are seasoned and will also diversify into new markets. The ecosystem will eventually adapt."
The US remains India's biggest trading partner, accounting for 18%, or $80 billion, of merchandise exports in 2024. Of this, $55 billion of shipments will be impacted, as smartphones, petroleum products and pharmaceuticals remain exempt for now. Thus, about 13% of India's exports are at risk from the elevated tariff, Barclays estimated.
"Over the medium term, India is working to expand export markets beyond the US via free-trade agreements, to reduce dependency on a single partner," Barclays analysts Aastha Gudwani, Amruta Ghare and Imtiaz Shefuddin said in a note.
Banks' export credit outstanding stood at ₹12,021 crore at the end of May, less than 0.1% of the total bank credit of ₹183 lakh crore, Reserve Bank of India data showed.
Hence, from a banking standpoint, the overall impact will be limited, barring client-specific stress, senior bankers said. They also expect the government to extend fiscal relief to affected exporters.
About 13% of India's merchandise exports will face the elevated 50% US tariff. While 25% of the duty came into effect on August 7, the balance became operational Wednesday.
"There are four, five sectors that may face sharper impact. But these sectors, from the banking system's point of view, pose no systemic risk, as exposures here are not very large," State Bank of India chairman CS Setty said during the bank's post-earnings analysts call on August 8.
Banks offer working capital loans, or pre-shipment credit, to exporters for buying raw materials and producing or packaging goods. They also extend post-shipment credit once goods are dispatched to ease cash flow gaps in the payment cycle.
The five sectors most vulnerable to the higher US tariff are electrical machinery, gems & jewellery, textiles, machinery & mechanical appliances and agricultural products. Of these, gems and jewellery carry the largest US exposure at about $10 billion, Crisil said. The 50% tariff will also affect $19 billion worth of exports across textiles, chemicals, auto components and seafood, the agency added.
"We are monitoring things closely. We remain in touch with every affected customer, particularly those with more than 10% of their business in the US," said CSB Bank managing director Pralay Mondal. "Some support from the government is likely. Exporters are seasoned and will also diversify into new markets. The ecosystem will eventually adapt."
The US remains India's biggest trading partner, accounting for 18%, or $80 billion, of merchandise exports in 2024. Of this, $55 billion of shipments will be impacted, as smartphones, petroleum products and pharmaceuticals remain exempt for now. Thus, about 13% of India's exports are at risk from the elevated tariff, Barclays estimated.
"Over the medium term, India is working to expand export markets beyond the US via free-trade agreements, to reduce dependency on a single partner," Barclays analysts Aastha Gudwani, Amruta Ghare and Imtiaz Shefuddin said in a note.
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