PNB scam may push up pricing for trade loans as rates rise as much as 0.5%

Signs that trade credit is getting tougher for smaller firms have hurt the rupee, which is among Asia's worst performers this month

The fallout from India’s biggest banking fraud is spreading to the market for trade financing, as foreign lenders become more reluctant to accept the guarantees from their local counterparts that underpin the loans.

Citigroup Inc., Deutsche Bank AG, Standard Chartered Plc and HSBC Holdings Plc are among banks reducing exposure to these transactions, used by smaller companies to access short-term dollar funding, said people with knowledge of the matter. As questions are raised about the creditworthiness of guarantees from Indian state-run banks, rates have risen by as much as 0.5 percentage point for some types of financing, the people said,