Lower tariff lifts lending outlook for banks, NBFCs

BANKS AND NON-BANKING financial companies (NBFCs) with exposure to tariff-affected sectors are likely to see a revival in lending activity following the reduction in US tariffs from 25% to 18%, though lenders remain cautious as they await the final contours of the trade deal.

- KSHIPRA PETKAR

When the US tariff hike was announced in July, there were concerns that export-driven MSMEs, especially in the textiles and gems & jewellery sectors, would face pressure, hurting growth and asset quality. However, the sector had export orders till January, which provided a cushion through Q3, and domestic support measures further limited the impact.The fear was of sharper stress in Q4 and early Q1, but that risk has now eased, analysts said.

“While some asset-quality pressure may persist in the near-term, the medium-term outlook remains positive with expected improvement in cash flows of MSMEs,” said Sachin Sachdeva, vice president, ICRA.