Finance Ministry to Assess Impact of US Tariffs on MSMEs & Credit Support Measures

The Ministry of Finance is planning to hold a review meeting on October 13 with public-sector banks (PSBs) to assess the impact of the punitive tariffs by the United States (US) on the micro, small and medium enterprises (MSME) sector and evaluate their credit requirements, reported Business Standard.

The meeting will be chaired by Department of Financial Services (DFS) Secretary M Nagaraju. According to Business Standard, the review will focus on financial inclusion schemes, such as MUDRA and credit guarantee, with an aim to decode how external trade pressures are impacting MSMEs. The meeting also aims to guarantee that sufficient credit support is maintained under current government initiatives.

The government is also worried that higher tariffs may result in an increase in non-performing assets (NPAs) for MUDRA loans. The DFS will assess the situation and ask bankers for recommendations on potential corrective actions. MSME industry associations have expressed alarm about its profound effects and called for prompt government action, reported Business Standard.

The disbursement target under the Pradhan Mantri MUDRA Yojana for FY26 had been set at ₹2.4trn, of which ₹99,064 crore had been disbursed until September, accounting for about 42% of the total annual target, an official told Business Standard.

In addition, Vinod Kumar, President of the India SME Forum, told Business Standard that the steep tariff hike could lead to an annual business loss of over $30bn, with MSMEs being the hardest hit due to their limited financial buffers and capacity constraints.

According to Business Standard, banks have been instructed to decrease the number of inactive accounts under the Pradhan Mantri Jan Dhan Yojana through various saturation drives, so the meeting is also anticipated to review the status of these accounts.

Supporting MSMEs Amid Trade Pressures

Meanwhile the government has been taking steps to help MSMEs grow and improve efficiency, the investment and turnover limits for MSME classification have been increased by 2.5 times and 2 times respectively, according to a news release by the Ministry of Micro, Small & Medium Enterprises.

According to a news release by the Ministry of Micro, Small & Medium Enterprises, MSMEs have shown a significant growth trajectory, contributing 45.73% to exports in 2023-24, which increased to 46.79% by May 2024, highlighting their growing impact on India’s trade performance.

Another report by the Federation of Indian Chambers of Commerce & Industry stated that the businesses including SMEs need to work with policymakers to develop a supportive policy framework that promotes sustainability and ESG practices among SMEs. Setting sustainability targets, providing access to green technologies and the streamlining compliance for SMEs in India, are some of the ways in which sustainability can be integrated within the SMEs in India.