Indian banks face modest exposure to US tariff-hit sectors

They should be able to manage the credit costs and asset quality.

Indian banks should be able to manage the impact of the US tariffs on their asset qualities given their limited exposures to affected sectors, according to CreditSights Research by Fitch Solutions.

“We see greater second order implications for the Indian banks in terms of a slowdown in corporate loan demand, which was already subdued in F1Q26, and dampened sentiment towards future investments into India,” CreditSights said.

CreditSights sees a “manageable” blow to the Indian economy given its modest export exposure to the US of about 2% of its gross domestic product (GDP).

But the 50% tariff rate would weigh on several industries, including textiles, jewellery, apparel, seafood, machinery and mechanical appliances, chemicals, and auto components. These are industries who has the US as one if not their largest export market.

For banks, credit costs will come higher as a result of the tariffs, but asset quality should be manageable at least for banks under the coverage of CreditSights. This is due to their limited exposure to the most affected sectors, at less than 10% of their total outstanding fund based (FB) and non-fund based (NFB) exposures.