Trump tariff: Banks look to contain impact

CHENNAI: Commercial banks have beefed up measures to contain the impact of 50% tariff on India's exports to the US effective from Aug 27. They are looking at multiple options including temporary interest concessions, flexible repayment structures and working capital lines to help manage cash flow pressures arising from delayed shipments.

The move comes in the wake of discussions between financial institutions and exporters over the adverse impact of the proposed tariffs.State-owned Indian Bank is exploring the feasibility of implementing several steps to support affected exporters. "We are engaging with exporters and assessing their working capital needs. Enhanced access to export insurance and credit guarantees and working capital lines tailored for MSME clusters in high-impact zones such as Tirupur and Surat are among the measures taken by our bank to offset the adverse impact.

Also, we are considering some interest concessions for a temporary period and waiving some administrative fees such as loan processing charges, forex handling charges and collection fees," an Indian Bank spokesperson said.During discussions with exporters and manufacturers , the former have evinced interest in exploring diversification strategies, such as shifting exports to the EU, UK, ASEAN, and Africa.

Another public sector bank, Indian Overseas Bank (IOB), is advising exporters and manufacturers on alternative markets, product diversification, foreign exchange exposures and its hedging to mitigate currency volatility. Exporters are concerned about probable reduction in fresh orders, increased competition in new markets, narrow profit margins, order cancellation or price renegotiation. "We have increased sector-specific monitoring for early identification of stress and prompt resolution.

Our bank is also keeping a close watch on the Govt of India initiative and align our interventions accordingly," IOB MD & CEO Ajay Kumar Srivastava told TOI.A sizable number of exporters and manufacturers, who have availed credit from banks, have exposure to sectors such as textiles, auto components, gems and jewellery, leather products (footwear & accessories), chemicals, and food processing in the US market.Tamilnad Mercantile Bank (TMB) MD & CEO Salee S Nair said, its relationship managers are conducting detailed discussions with each customer to assess their exposure, review ongoing contracts, and understand the possible implications for order volumes, shipment timelines, and working capital needs. "We are extending flexible repayment structures and, where necessary, enhancing working capital lines to help manage cash flow pressures arising from delayed shipments or margin compression.

As of date, TMB's total export credit post-shipment outstanding stands at Rs 102.8 crore, of which Rs 20.7 crore is linked to the US market," he added.