Banks and NBFCs have begun to tighten credit score filters by reassessing salaried incomes and halting disbursements to migrant staff in Tiruppur, Tamil Nadu’s third-largest credit score market with ₹67,900 crore in excellent financial institution credit score. The tightening comes because the nation’s largest knitwear export hub faces a extreme monetary pressure, with the 50% US tariff hitting export volumes and squeezing already skinny margins.
“Whereas collections have been holding up nicely in Oct/Nov ’25, lenders have tightened credit score filters out of warning,” ICICI Securities mentioned in its newest report. The report was based mostly on interactions with over 10 banks, NBFCs and small finance banks, together with 8–10 debtors, together with giant exporters, transporters and uncooked materials suppliers.
Lenders Recalibrate Danger
Lenders at the moment are contemplating solely 75% of money wage earnings for FOIR ((Mounted Obligations to Revenue Ratio) calculations, in contrast with 100% earlier. For the self-employed, FOIR is being utilized on 50% of taxable earnings towards 65% earlier. Lenders have additionally briefly stopped disbursements to migrant staff. Tiruppur’s garment business employs an estimated 600,000 staff throughout quite a few items.
Tiruppur is the third-largest credit score market in Tamil Nadu, with excellent financial institution credit score of ₹67,900 crore as of September 2025. ICICI Securities famous that disbursements to the area will seemingly be affected within the second half of FY26 resulting from cautionary lending. As of September 2025, Equitas Small Finance Financial institution, Aptus Worth Housing, 5 Star Enterprise Finance and Shriram Finance every had over 20% of their publicity in Tamil Nadu.
Tariffs Drive Market Pivot
Tiruppur produces textiles price ₹72,000 crore, with greater than 60% catering to exports. The US accounts for a fifth of those exports at about ₹15,000 crore. It was hit by the US tariff, which includes a 25% reciprocal responsibility and a further 25% penalty linked to India’s purchases of Russian oil.
Whereas greater tariffs initially derailed export momentum, the scenario is stabilising as exporters pivot to markets similar to France, Italy and Spain, or route shipments via Vietnam and the UAE. The tariff influence has led to some job losses, notably in items targeted on US exports. Nonetheless, staff are discovering various jobs rapidly, albeit with marginal pay cuts, leading to no significant influence on money flows to this point, the report mentioned.
India’s knitwear capital employs round 10 lakh staff — 60% of them ladies — with a big migrant workforce. Six out of 10 staff are migrants, primarily from Uttar Pradesh and Bihar.
The report additional mentioned, typical clients for NBFCs and SFBs are small merchants and store house owners, whose money flows rely closely on the native financial system. Whereas the native financial system has seen a gentle disruption, debtors are exhibiting resilience by slicing discretionary spending. The one section exhibiting indicators of stress is migrant labourers, who’re largely contracted and due to this fact face greater job losses. “However lenders have restricted publicity to this borrower class,” it added.
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