Banks will take a more critical look at loans to export-driven companies after the RBI’s relief measures

Banks expected to keep a close eye on asset quality as moratoriums, deferrals and rate pressures reshape risks | Photo credit: ArLawKa AungTun

Madan Sabnavis, chief economist at Bank of Baroda, said banks will have to keep a close eye on asset quality beyond December 2025 as the impact of rates on exports of garments, jewellery, auto parts and leather items, among others, is mostly in the MSME sector, which could become vulnerable due to this shock.

“…As exporters have been given time to reduce their dollars from nine to 15 months, there may be a temporary mismatch between inflows and outflows, putting pressure on the currency,” he said.

Looking at risk

Anil Gupta, Senior VP & Co Group Head at ICRA Ratings, said banks will have to keep an eye on the extent to which exporters are taking advantage of the moratorium or deferment. If a large number of borrowers take advantage of any of the support measures, this could increase uncertainty about asset quality for lenders. A five percent provision on such loans, where lenders have provided support to exporters, could also result in an increase in provisions, but it is unlikely to have a material impact on profitability in the short term, he said.

Karan Gupta, director and head of financial institutions at India Ratings & Research, said that like during the Covid-19 period, there is always an option to extend the moratorium period if necessary.

“If the trade deal takes longer to finalize, and the regulator sees lingering impacts, then the moratorium may be extended. That flexibility always exists. Lenders will be cautious when lending to export-related entities. They will assess new loans on an entity-by-entity and sector-by-sector basis,” he said.

There will be increased hesitancy or scrutiny over existing exposure, he said, adding that not all export-related progress will be affected by tariffs. Of the affected loans, banks will have to determine how many are secured and how many are unsecured.

Credit support

Harsh Dugar, ED, Federal Bank, said the moratorium and deferment granted to these exporters would provide liquidity, with the deferral of repayment lasting till September 2026. Moreover, a reduction in margins by reassessing the limits would provide additional liquidity compared to existing shares and debt.

“Finally, the extension of export credit up to 450 days would help exporters overcome these trade disruptions. These measures would provide immediate relief to exporters and required liquidity until normalcy resumes and bilateral trade agreements are signed. Market expectations are that the stress faced would be temporary and should be resolved as the government is working on multiple initiatives to resolve the situation and also explore other options,” he said.

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Published on November 19, 2025