Govt considers loan recast for textile sector

The government is considering restructuring Rs

35,000-crores loan which could provide a much required relief to the debt-ridden textile sector. Low or no export orders due to the sluggish economy in the West and falling profit margins have negatively affecting the sector for quite some time.

The RBI may issue norms for banks soon, since both the finance and textile ministries have okayed the recast plan last week. In recent times, about 300 textile units saw their raw material stock value erode due to fall in cotton prices and dip in apparel exports to Europe. And if the debt-recast plan falls in place then the 35 million workers’ would breathe a sigh of relief as the textile units are desperately looking for a two-year moratorium on repayment of principal.

A loan restructuring would help the ailing textile units apart from saving banks from booking fresh slippages in their books which are already under pressure by rising bad loans amid economic downturn. Lenders like SBI, Canara Bank, Bank of Baroda and IDBI Bank have biggest exposure in this distressed sector.

The package involves recast of Rs 22,000 crores term loan, Rs 5,500 crores working capital term loan and another Rs 7,500 crores loan for textile units under small and medium enterprise segment. The borrowers may get a two-year moratorium on principal repayment and the working capital term loans may get an extended for five year tenure.