Commercial banks have approached the Reserve Bank of India (RBI) seeking an extension of trade relief measures that permit loan moratoriums for exporters beyond the current December 31 deadline. The measures, announced in mid-November, allow banks and non-banking finance companies to offer exporters moratorium on loan repayments and restructuring options to ease stress from delayed receivables and extended working capital cycles.

Relief Measures and Current Framework

The scheme was designed to prevent defaults amid global trade uncertainties and tariff-related disruptions. Under the current framework, borrowers with export credit facilities from regulated entities as of August 31, 2025, and classified as standard, are eligible for relief.

Banks Push for Quarter Extension

Banks have urged RBI to extend the scheme by one more quarter, citing continued challenges for exporters from supply chain realignments and certification delays. The request particularly focuses on sectors with high exposure to the United States, such as marine products.

"Exporters are reaching out to banks, seeking an extension of the RBI moratorium scheme," said B K Divakara, executive director at CSB Bank. "Most are waiting for clarity on trade deals to assess the cost impact of tariffs."

Lenders have pointed out that the full impact of global trade challenges is likely to become clearer in the next quarter, with factors including weak global demand, trade policy issues, and tariff-related matters creating ongoing stress for exporters.

Market Response and Banking Sector Outlook

Bankers report that uptake of the moratorium has been modest compared to similar schemes announced during the Covid period. However, they expect demand to increase in the next quarter as trade impacts become more apparent.

"We have not seen any major impact on our portfolio yet. The real impact will be felt next quarter. I am also not ruling out demand for RBI's restructuring scheme," said Bank of India Chairman C S Setty in a November 22 interview.

Setty observed that it was too early to assess the impact of the 50% tariff imposed by the US on Indian exports, noting that "many exporters can diversify their geographical markets in a short span of time."

Export Credit Landscape

A senior bank official indicated that extending the trade relief measures by at least one more quarter would provide a safety net if receivables remain delayed. The official noted that demand for relief measures may remain weak since exporters could offset tariff impact through a depreciating rupee, which has fallen nearly 6% over the past year.

The latest development underscores the ongoing concerns in the export sector and the banking industry's efforts to support exporters facing global trade headwinds amid continued economic uncertainty.

Indian government bonds experienced a notable decline on Friday as weak demand at a central government debt auction triggered a selloff in the secondary market, raising questions about the durability of recent market gains amid concerns over buyer interest.

Bond Yield Movement and Market Performance

The benchmark 10-year government bond yield demonstrated the market's sensitivity to auction outcomes, with significant movement recorded during Friday's trading session.

The yield increase reflects the inverse relationship between bond prices and yields, with rising yields indicating declining bond prices in response to weak auction demand.

Debt Auction Results and Market Impact

New Delhi's bond auction revealed underlying market vulnerabilities that had been masked by recent positive momentum. The government successfully sold ₹32,000 crores ($3.56 billion) worth of bonds, but the execution highlighted demand-side challenges.

The higher-than-expected cutoff yields exposed underlying demand weakness, effectively ending a brief rally that had developed after two sessions of sharp gains earlier in the week.

RBI Liquidity Measures and Market Response

Despite recent Reserve Bank of India interventions, market sentiment remains cautious. On Wednesday, the 10-year bond yield had posted its biggest single-session drop in over seven months following RBI announcements of substantial liquidity infusion measures.

The central bank's comprehensive liquidity package includes:

• ₹50,000 crores in bond purchases scheduled for next week
• ₹1.50 trillion planned for January
• $10 billion three-year dollar-rupee buy/sell swap in January
• Total system infusion of ₹2.90 trillion over the next month

Over 2025, the RBI has purchased bonds worth ₹6.50 trillion, representing a record high level of market intervention.

Market Sentiment and Analyst Perspectives

Market participants and analysts have expressed mixed views on the sustainability of recent gains. A trader with a state-run Bank of India noted that while market sentiment has shown improvement, it remains fragile without structurally favorable demand-supply dynamics.

DBS Bank analysts provided clarity on RBI policy intentions, stating that "the governor had clarified that the OMOs and swaps should be viewed as a measure to boost liquidity rather than steps to steer currency or yields."

Interest Rate Movements

India's overnight index swap (OIS) rates reflected the broader market uncertainty, with rates ending higher amid shallow trading volumes.

Bond market participants suggest that the substantial RBI liquidity infusion creates potential for sustained gains in government bond prices while ensuring optimal banking system liquidity levels. However, Friday's auction results demonstrate that underlying demand conditions continue to influence market direction despite central bank support measures.