Textile Ministry moves new proposal to recast industry loan of Rs 1 trillion

MUMBAI: Seeking a bailout for the troubled textile industry, the ministry has moved a revised proposal for recasting textile loans worth over Rs 1 trillion.

"The initial consultations with the Reserve Bank has been done, but was negative. We are re-approaching them. The RBI has already given its opinion to the Finance Ministry and the banking division of the ministry will try to do some more consultations with the RBI," Textile Commissioner A B Joshi told reporters.

He said the government feels that there is a need to give some relief to the textile industry, hence the second revised debt recast proposal to the ministry of finance.

He, however, refused to reveal details of the new proposal.

The textile sector first saw sudden a rise in cotton and cotton yarn prices in the season beginning October, 2010. And then there was a massive crash in yarn prices from April, 2011 on poor demand following indications of a slowdown in the US and the sovereign credit crisis in the Eurozone nations, leading to a massive credit crisis in the industry.

These two markets account for almost 65 per cent of the country's textile exports.

Admitting that RBI had expressed reservations against first proposal as it had come within the two years after the FY 2009 recast, Joshi, who was addressing a buyer-seller meet of the poowerloom industry, said, "So, we are approaching the RBI again through the ministry of finance."

The new proposal comes after the RBI turned down a government proposal to restructure textile loans worth Rs 1 trillion, largely from public sector lenders, towards the end of the last month, saying the move is not in the best international practice.