India’s labour-intensive textile, apparel and seafood exporters are grappling with a severe working capital crunch as banks scale back fresh lending and tighten underwriting norms in sectors hit hard by Washington’s 50% tariff.
“The entire industry has come to a standstill. And the most unfortunate part is banks are not renewing our working capital limits. We are totally stuck,” said Alex K Ninan, vice-president of the Seafood Exporters Association of India (SEAI).
Seafood and textiles hardest hit
Seafood exporters are among the worst affected. The US, which accounts for 37% of India’s $7.45 billion seafood exports in FY25, has doubled duties on Indian shipments to 50%. The move has effectively wiped out over ₹22,000 crore of seafood trade to the American market.
The disruption follows earlier tariffs of 25% imposed by former US President Donald Trump, who had also threatened additional levies linked to India’s continued oil imports from Russia. On Monday, Washington formally outlined its plan to enforce the 50% duty effective August 27.
With the US market nearly shut, exporters are struggling to reroute consignments to China, the EU and the UK, which are awaiting further price crash. “Since the US market is gone, banks are warning to realise bills from shipments to other countries. If they do that, how do we pay salaries or keep cold storage running 24/7 with all this inventory?” Ninan asked.
He added that the industry is seeking a 30% increase in working capital, soft loans at international rates, Covid-like interest subvention, and a two-year moratorium on repayments. “This will give the industry some breathing space to find new markets and build a strategy for value-added products.”
The textile and apparel sector, with exports worth $37 billion in FY25, is facing similar pressure, with nearly a third of its shipments going to the US. “We need longer moratoriums from banks and rating agencies should not downgrade immediately, which will further affect access to fresh credit,” said Kumar Duraiswamy, joint secretary of the Tiruppur Exporters Association (TEA). Tiruppur, India’s knitwear hub, exports about ₹45,000 crore worth of apparel annually, more than half of which goes to the US.
Banks reassess exposure, exporters seek relief
Banks, too, have begun reassessing exposure. “Given the 50% US tariff, we have initiated a portfolio-wise stress scan of our textile and seafood-processing exposures to map end-market concentration, order pipelines, and hedge coverage,” a senior official at a public sector bank said. “We are individually tagging accounts with elevated US dependence and recalibrating working capital lines where needed.”
Public sector banks are the largest lenders to these export-oriented MSMEs. SBI, for instance, has an exposure of over ₹39,000 crore to textiles, while Canara Bank and Indian Bank have exposures of ₹18,000 crore and ₹8,000 crore, respectively. It is, however, unclear how much of this is tied directly to US-focused exporters.
Private lenders are adopting a cautious but supportive approach. “To help exporters navigate tariff uncertainties, we are extending flexible repayment and restructuring options, along with enhanced working capital facilities to ensure continuity of procurement, production and deliveries,” said Salee S Nair, MD & CEO of Tamilnad Mercantile Bank. He added that the bank’s forex and trade finance teams are actively guiding clients on hedging and exploring alternate markets. TMB’s total post-shipment export credit to textiles stands at ₹102.8 crore, of which only ₹20.7 crore is linked to the US market.
Textile industry groups are also demanding regulatory relief. Duraiswamy said exporters need the NPA classification period extended to 180 days from 90 and removal of the ₹50 lakh threshold on packing credit.
Meanwhile, banks say they are offering selective relaxations. “We are offering faster sanctions for export packing credit and PCFC, targeted interest concessions for compliant receivable-insurance/hedge coverage, and, on a case-by-case basis, temporary moratoriums on principal along with restructuring within regulatory guidelines where cashflow visibility remains intact,” the PSU banker said.