Pakistan is at risk of being put on a blacklist by the European Union (EU), according to a report by The Economic Times.

Such a move could hit Pakistan's textile trade and banking channels with Europe, Indian foreign ministry officials told the newspaper.

The EU, along with China and the United States, is among Pakistan's top trading partners.

The G7's Financial Action Task Force (FATF) has already placed Pakistan on its grey list for terror financing.

A FATF spokesperson last week pointed out deficiencies in Pakistan's policy on curbing terror financing.

"The government of Pakistan, over the last few years, has taken a number of measures to address these issues, including through enactment of legislation, issuance of regulations and guidelines by SBP and SECP to the financial sector, establishment of the Financial Monitoring Unit and implementation of UNSC 1267 sanctions on the entities of concern [JuD/FIF]. We will take further actions for addressing any remaining deficiencies," the spokesperson told The Hindu.

Pakistan has until June to submit to the FATF an action plan to control terror funding and give a political undertaking to implement the plan.

Pakistan was on the FATF grey list for three years until 2015, according to a Reuters report.