RBI for debt recast of textile units on a case-by-case basis

Jul 15, 2012 |

New Delhi

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Rejecting across the board restructuring of loans for the cash-starved textile sector, the Reserve Bank has asked banks to consider debt recast for the industry on a case-by-case basis.

Banks have been advised to look at debt recast on a case-by-case basis and special window will be provided for restructuring, official sources said.

The special window will be provided by all the banks to the textile sector between August 1 and October 30, 2012, sources said.

The Finance Ministry has asked banks to consider stressed loan accounts in the textile sector for restructuring, including second restructuring, so that viable loan accounts are revived and the financial health of the units are restored.

The sector has been hit by a sharp volatility in cotton yarn prices and poor domestic and global demand.

As a result textile units were facing difficulty in repaying term loans and financing working capital and demanded debt restructuring for the entire sector.

Textile industry associations were seeking a two-year moratorium on long term loans. The total outstanding debt of textiles sector is estimated at Rs 1,55,809 crore of which debt of Rs 35,000 crore require restructuring.

According to a senior bank official, large borrowers in man-made and natural fibres were relatively safe, and the problem was only in the small and medium segments.

The softening of cotton prices are expected to improve the profitability of the sector and companies would be in a position to service their loans, the official added.

In order to deal with the global meltdown triggered by the Lehman Brothers crash, RBI brought in a special dispensation providing for a second restructuring for the entire textile sector in 2008.

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