With the ongoing West Asia crisis disrupting trade, banks have approached the Reserve Bank of India (RBI) through the Indian Banks’ Association (IBA) seeking an extension of the trade relief measures, announced in November, for an additional two quarters, people aware of the development told FE.
On November 14, the RBI announced measures for exporters such as moratorium or deferment of payment of all term loans and recovery of interest on working capital loans to ease working capital facilities falling due between September and December 2025 due to US President Donald Trump’s tariff measures.
Said a senior public sector banker, “If the war extends, exporters will feel the heat, especially MSME borrowers tied to global markets. Stress in that segment could quickly transmit back to banks, amplifying systemic risk.”
MSME Factor
He explained that these measures will provide breathing space for vulnerable borrowers. “The RBI has already taken cognizance of the matter and sought information from banks on their exposure to the region,” he added.
Already some measure have been taken. For example, the maximum tenor for pre‑ and post‑shipment export credit disbursed till March 31, 2026, has been extended from one year to 450 days. Lenders are also allowed to liquidate packing credit facilities taken by exporters on or before August 31, 2025.
Another banking source said that the sector had sought similar reliefs in December as well. But the central bank did not extend it. With the crisis in the West Asia erupting since February-end, thing are expected to get tighter.
“We have now again made the request with the regulator to extend those measures to two more quarters with retrospective effect, subject to periodic review until the crisis ends, as the duration remains uncertain. Even if the war ends suddenly, supply‑chain normalisation is expected to take at least two months, so pressure will persist,” the source added.
From Trump Tariffs to War
According to a private sector banker, the RBI may not have been keen to extend the facility in December because of limited utilisation. “It didn’t pan out because the anticipated risks didn’t fully materialise during that time—in fact, they diminished. But now an entire new set of unexpected risks have emerged. This requires the banking regulator to provide some relief,” said the private sector banker.
Bankers said that they are watchful of the situation and engaging with exporters constantly to understand problems faced by them.