Trade Fragmentation Poses Risk to Financial Stability, says SBI Chairman

Trade fragmentation and tariff tensions could have serious consequences for the banking and finance sector, which depends on predictability and trust, State Bank of India Chairman C.S. Setty said on Thursday.

“The global economy is at a crossroads, with tariff wars and trade tensions dominating the headlines,” Setty said at SBI’s Banking and Economic Conclave in Mumbai. He noted that areas such as trade, critical minerals, and technology, once seen as avenues for cooperation, are now being weaponised to serve national interests.

Setty referred to the high tariffs imposed by the US and export restrictions by China on critical minerals, saying the shift towards protectionism has heightened uncertainty. “Volatility is the order of the day and it is adversely affecting investment decisions, capital flows, and financial returns,” he said.

Amid eroding global cooperation, Setty said the concept of self-reliance, or Aatmanirbhar Bharat, has gained fresh significance.
Finance Minister Nirmala Sitharaman, who also addressed the event, said India must strengthen self-reliance in five key areas; economy, social sector, technology, defence strategy, and environment and energy; to achieve the goal of Viksit Bharat 2047.

The minister said the world is witnessing slower globalisation, fragile supply chains, and rising costs linked to climate transition, which are making capital flows more speculative. “India must strive for independence from fragile global energy and resource systems by nurturing sustainability at home,” she said.

Sitharaman also said India is working to strengthen trade integration with developed economies through free trade agreements. “Efforts are in full force to conclude trade deals with the US and the European Union,” she said, adding that talks with the US could also ease the 50% tariff imposed on Indian goods.

New Delhi and Brussels have set a target of finalising their agreement by December, she said.