Support Measures for Indian MSMEs Affected by US Tariffs

The Indian government and lenders are taking steps to mitigate the impact of recent US tariffs on Indian exports, especially targeting small and medium enterprises (SMEs).

Immediate Relief Measures

• Lenders are considering waiving administrative charges such as processing fees, forex hedging costs, and collection charges for SMEs.
• Banks may offer discounts on interest rates, extend loan tenures, and refrain from charging penal interest on delayed payments.
• Some relief is contingent on a government subvention scheme or relief package, which is currently limited.

Government Plans

• An elaborate plan is underway to support exporters affected by the 50% duty on imports from India.
• Plans include tailor-made schemes under the proposed Export Promotion Mission, diversion of goods to other markets, and promoting homegrown brands.

Industry Demands and Concerns

• Industry demands include charging penal interest only after an account becomes non-performing.
• Collaterals for forex loans are a concern, as banks often reject textile machinery as collateral.
• Discussion on sector-specific credit lines with relaxed collateral requirements and low-cost export factoring access is ongoing.

Importance for MSMEs

• MSMEs play a crucial role in India's exports and employment.
• In sectors like textiles, many exports are conducted by small enterprises.
• Banks advise clients to seek coverage under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTSME).
• Efforts are made to assist firms with Udyam registration and other documentation for eligibility under the guarantee scheme.