Indian banks are expected to withstand the impact of new US tariffs on their asset quality, given their relatively low exposure to the most affected industries, according to a CreditSights report from Fitch Solutions.
The report noted that the bigger risk lies in weaker corporate loan demand—already subdued in the first quarter of FY26—and a potential drag on investor sentiment towards India.
While the US accounts for only around 2% of India’s GDP through exports, the steep 50% tariff will hit sectors such as textiles, jewellery, apparel, seafood, machinery, chemicals, and auto components, many of which rely heavily on the US as a key export destination.
CreditSights added that banks’ credit costs may rise, but asset quality should remain under control, as their combined exposure to these vulnerable sectors is below 10% of total fund- and non-fund-based lending.
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