Exporters who have high exposure to the U.S. market have urged the Reserve Bank of India and the Centre to announce relief measures at the earliest such as longer duration for pre- and post-shipment credit and interest equalisation scheme.
Pankaj Chadha, chairman of EEPC India, said in a press release that in the wake of the recent U.S. tariffs on Indian exports, the industry was anticipating a significant loss. India’s engineering exports to the U.S. averaged around $20 billion.
Access to affordable export financing is a necessity for MSMEs, especially when competing countries have much lower interest. The Interest Equalisation Scheme (IES) that was discontinued in 2024 earlier provided significant relief by lowering borrowing costs for exporters. The government should reinstate the scheme, particularly for MSMEs.
The cost burden on MSMEs has increased as banks continue to recover the pre-shipment premium from the exporters. They continue to face difficulties when seeking finance from banks and financial institutions, where high collateral requirements persist. Additionally, the credit rating system used by banks to determine collateral and interest rates disproportionately affects MSMEs.
Recent data has indicated that due to the US exposure of engineering exporters, their credit rating has been affected. The rating agencies do not consider the US exposure of companies while calculating their credit rating at least for this year, he said.
Ajay Sahai, Director General of the Federation of Indian Export Organisations, said the credit rating agencies should not downgrade the ratings for exporters who have higher US exposure. “The banks should provide a supporting hand to the exporters,” he said.
The cash flow is affected for exporters in sectors such as home textiles and carpets that have 40-60 % exposure to the US. The banks should provide one year moratorium for payment of interest and principal.
While the pre and post shipment credit is for 270 days, banks usually give for 180 days. Banks should give longer duration credit to the exporters. Similarly, if the export realisation is not on time banks charge nearly 14% penal interest. The situation may aggravate now. So, banks should not charge high penal interest on the exporters.
Published – September 13, 2025 08:22 pm IST
Source: https://www.thehindu.com/business/exporters-with-exposure-to-the-us-demand-support-from-banks/article70046387.ece
