The Ministry of Finance will soon convene a high-level meeting with public sector bank (PSB) chiefs to review the flow of credit to India’s micro, small, and medium enterprises (MSMEs). The session, chaired by Department of Financial Services (DFS) Secretary M. Nagaraju, aims to assess the impact of recent U.S. tariff hikes and ensure continued access to affordable finance for small businesses.
According to government officials, the meeting will evaluate how global trade disruptions—particularly the 50% tariff increase imposed by the United States—are affecting India’s export-oriented MSMEs. The agenda includes reviewing current financial inclusion initiatives such as the Pradhan Mantri MUDRA Yojana and the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).
MSME Exporters Raise Concerns Over Rising Borrowing Costs
Engineering exporters, who account for nearly 45% of India’s shipments exposed to U.S. tariffs, have expressed growing concern over access to credit and rising borrowing costs. The Engineering Export Promotion Council (EEPC) of India highlighted that the new tariffs have significantly impacted export margins and cash flow.
EEPC Chairman Pankaj Chadha noted that while MSMEs play a key role in India’s engineering sector, they continue to face challenges in securing collateral-free loans. High collateral requirements and stringent credit rating assessments often result in higher interest rates, limiting liquidity during periods of trade stress.
Chadha has urged policymakers to consider temporary relaxations in credit rating parameters for MSMEs affected by U.S. tariffs. He also emphasized the need for a simplified loan approval framework for export-oriented units to maintain competitiveness and protect jobs.
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Credit Flow and Financial Support Under Review
The Finance Ministry is expected to assess the performance of PSBs in extending credit under ongoing government-backed schemes. The discussion will also explore mechanisms for easing collateral norms, expanding credit guarantees, and improving turnaround times for MSME loan approvals.
Officials added that the ministry may propose sector-specific interventions to offset the effects of trade disruptions, particularly for small manufacturers dependent on U.S. markets. The goal is to maintain steady credit availability and minimize disruptions in production, export orders, and employment.
By holding consultations with banking leaders, the government seeks to ensure that India’s MSME sector remains resilient amid changing global trade dynamics and continues to contribute to industrial growth and exports.