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Govt plans credit guarantees for small firms, exporters hit by US tariffs
The federal finance ministry has proposed to provide 10-15 per cent credit guarantees to banks for advancing loans to stressed small businesses, with turnover up to ₹500 crore, that fall under the Reserve Bank of India's (RBI) so-called special mention accounts (SMA), the sources said.
Loans that have not been repaid for 0-90 days fall under RBI's SMA 0-2 category, but are not classified as non-performing assets.
India's small businesses still struggle with limited access to timely and adequate formal credit.
The government will allocate about ₹4,000 crore for providing guarantees to banks, both the sources said.
The scheme is designed for firms that are stressed due to external factors "beyond their control", and the eligibility criteria is being firmed up, according to the sources.
The criteria will cover small exporters who are currently facing uncertainties due to higher tariffs imposed by the US, a key market for Indian exports, the second source said.
The government estimates that about 55 per cent of its merchandise exports to the United States will be subject to the tariff imposed by President Donald Trump's administration.
The finance ministry did not immediately respond to an email seeking comment.
Separately, the Indian government is preparing a scheme to provide term loans for small exporters that would be backed by a government guarantee of a maximum 70-75 per cent, the second source said. The scheme was announced by India's finance minister in the budget for 2025/26.
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