Finance Ministry considering loan restructuring for textile units

NEW DELHI: The Textiles Ministry today said the Finance Ministry is considering a proposal of loan restructuring for the textile sector and a decision in this regard is expected soon.

"We had a meeting with Finance Ministry day before yesterday and they have given us 10 days time, so we hope we can have something before New Year ...," Textiles Secretary Rita Menon said here.

The Textiles Ministry has been following the matter with the Reserve Bank of India and the Finance Ministry after considering the industry's demand for re-setting of bank loans worth Rs 1 lakh crore.

Sources said the Finance Ministry will study the cases of sickness in units and accordingly prepare a report. This would be followed by inter-ministerial consultations.

The industry has been hit by a sharp fall in cotton yarn prices, poor domestic demand and curb on cotton yarn exports in last December. Now, the textile units are facing difficulty to repay term loans and financing working capital.

"SMEs in sectors like silk sector, power-loom and spinning are hit because of lack of working capital and high interest rates," she told reporters on the sidelines of Apparel Export Promotion Council (AEPC) function here.

Menon said that the Textiles Ministry is not requesting for a "cash outgo" rather it is a moratorium on loans for two years so that the working capital could be arranged for that time period.

She said the step of suspension of loan repayment for two years would protect units from becoming non-performing assets.

"... we are attempting to see these units are not termed non-performing assets," she added.

The government today also admitted in Parliament that banks have reported stress in repayments, as there is a slowdown in the textiles industry.

"Confederation of Indian Textile Industry had reported that out of 287 companies list in the Bombay Stock Exchange, 122 companies have reported net loss in the first quarter of 2011-12 and 166 companies have shown poor results compared to previous year," Minister of State for Textiles Panabaaka Lakshmi replied to a query on cotton industry in bad shape in the Rajya Sabha.