In a significant move to stabilize India's labor-intensive textile sector, the Apparel Export Promotion Council (AEPC) has formally petitioned the Reserve Bank of India (RBI) for a specialized export policy tailored to Micro, Small, and Medium Enterprises (MSMEs). Following a high-level meeting with Sanjay Malhotra, Governor, RBI on February 16, 2026, A Sakthivel, Chairman, AEPC highlighted, inconsistent lending rates and high borrowing costs are currently eroding the global competitiveness of Indian garment manufacturers.
Demand for enhanced interest subvention and equitable credit
The council’s primary objective is to rectify the ‘uneven lending landscape’ where banks determine rates based on internal balance sheets rather than standardized export potential. A central demand includes increasing the Interest Equalization Scheme subsidy from 2.75 per cent to 5 per cent. This adjustment is viewed as vital to offset the 50 per cent tariff shocks recently encountered in the US market, which have forced many Indian exporters to absorb costs to prevent order diversion to competitors like Vietnam and Bangladesh. Furthermore, the AEPC is seeking a more inclusive credit rating system that does not disadvantage first-time exporters or small units with limited CIBIL histories.
Navigating regulatory hurdles and working capital bottlenecks
Beyond interest rates, the AEPC emphasized the operational friction MSMEs face with Authorised Dealer (AD) Banks and rigid compliance frameworks. With the Union Budget 2026–27 already expanding the export obligation period to twelve months, the industry now requires the RBI to streamline the Credit Guarantee Scheme for Exporters (CGSE) to ensure liquidity reaches the factory floor without excessive collateral demands. As the sector aims for a $100 billion export target by 2030, these policy shifts are essential for MSMEs - which represent the backbone of India's 12 per cent share in total exports - to modernize their clusters and integrate with the global Digital Product Passport (DPP) mandates starting this year.
The Apparel Export Promotion Council (AEPC) is the official body facilitating Indian garment exports to global markets, primarily the US, EU, and UAE. With ready-made garment (RMG) exports reaching $15.5 billion in 2025, the council is now prioritizing Man-Made Fibre (MMF) and technical textiles. Growth strategies focus on leveraging new FTAs and the PM MITRA mega textile parks.
