Page 31 - Banking Finance September 2025

ARTICLE

entering India are expected to fall from 15 percent to just The agreement also has implications for capital markets.
3 percent. Iconic British exports like whisky, which faced 150 London remains one of the world's leading financial hubs,
percent tariffs, will now be taxed at 75 percent initially and and Indian corporates looking to raise funds internationally
40 percent over a decade. On the other hand, Indian tex- may increasingly turn to London for listings or bond issu-
tiles, marine products, and engineering goods will face zero ances. Indian banks with investment banking arms can fa-
tariffs in the UK, driving higher export volumes. cilitate these transactions, earning fee income while
strengthening India-UK financial integration.
This bar chart demonstrates visually how trade is ex-
pected to double by 2030, making the economic impact MSMEs once again stand out as a special case. While
of CETA the CETA opens doors for them to enter the UK market,
many lack the financial muscle to manage international
trade risks. Here banks can play a developmental role by
offering specialized MSME export finance products, hedg-
ing solutions against currency volatility, and digital platforms
for easier transactions. By tailoring their offerings to
the needs of smaller exporters, banks can help MSMEs
thrive internationally while securing a steady stream of new
clients.

Conclusion: A Defining Economic Mo-
ment

The signing of the India-UK CETA on 29 July 2025 is more
than just a trade agreement. It represents a strategic align-

"Projected Bilateral Trade Growth (2024-2030)" ment of two economies that share history, common values,
and complementary strengths. By eliminating tariffs, eas-
Banking Sector: The Financial Backbone ing services trade, enhancing investment flows, and creat-
ing institutional support for MSMEs, the agreement prom-
of CETA ises to double bilateral trade within five years. For India, it

Trade cannot expand without finance, and this is where In- means new export opportunities worth billions of dollars,
dian banks find themselves at the heart of the CETA opportu- stronger employment prospects in labour-intensive sectors,
nity. The growth of exports in sectors such as textiles, marine and deeper integration into global supply chains.
products, and engineering will directly increase the demand
for trade finance instruments such as letters of credit, bills of For the banking sector, CETA is a golden opportunity. Every
exchange, and export credit. With larger volumes of goods new export consignment, every investment flow, every re-
moving across borders, banks will also see higher foreign ex- mittance, and every corporate expansion generated by this
change transactions, boosting fee-based income.
agreement will pass through the channels of banking and
finance. Banks that respond proactively, by innovating, scal-
Corporate banking is another area of growth. As Indian firms
expand exports or set up operations in the UK, they will ing up, and forging international partnerships will not only
require working capital, term loans, and treasury services. gain business but also play a pivotal role in transforming the
Similarly, UK companies entering India under the CETA CETA vision into economic reality.
framework will require local financing partners.
In essence, this trade agreement is as much about financial
This mutual demand creates opportunities for Indian banks intermediation as it is about goods and services, and banks
to form partnerships with UK institutions, expand represen- are set to be the silent yet powerful engines that drive this
tative offices abroad, and even explore joint ventures. new era of India-UK cooperation.

28 | 2025 | SEPTEMBER | BANKING FINANCE