New Delhi : The Finance Ministry is set to hold a review meeting on Monday with public sector banks (PSBs) to assess the adverse impact due to the 50 per cent tariff hike imposed by the US on the micro, small, and medium enterprises (MSME) sector and take stock of their credit requirements, a senior official confirmed. This Finance Ministry meets banks on MSME credit as part of its measures to offer relief.
The Finance Ministry, chaired by Department of Financial Services (DFS) Secretary M. Nagaraju, will meet banks to understand how external trade pressures affect MSMEs and to ensure that the government continues providing adequate credit support. Thus, the Finance Ministry meets banks on MSME credit to maintain critical support frameworks.
The high-level meeting will review fund flows through financial inclusion initiatives such as MUDRA and government credit guarantee schemes. Indeed, the Ministry meets banks on MSME credit due to the significant impact of tariffs on exporters.
Recently, MSMEs in the engineering sector met RBI Governor Sanjay Malhotra to highlight their vulnerability amid US tariffs and requested assistance to reduce borrowing costs. The Finance Ministry’s meeting reinforces this urgency as it meets banks on MSME credit.
“India’s engineering exports to the USA average around $20 billion, which constitutes approximately 45% of the total exports exposed to US tariffs. This situation underscores our sector’s vulnerability and the urgent need for government support. To mitigate losses, the industry requires immediate intervention in key areas,” said EEPC India chairman Pankaj Chadha.
Chadha also highlighted the challenges MSME exporters face in securing collateral-free loans for export financing.
MSMEs continue to struggle to obtain finance from banks and financial institutions due to high collateral requirements. Additionally, banks use credit rating systems that disproportionately affect MSMEs, resulting in higher interest rates and extensive collateral obligations.
Chadha noted that US exposure has negatively impacted the credit ratings of engineering exporters and recommended that rating agencies exclude US exposure from credit rating calculations, at least for this year.
–IANS
