Relax lending norms for loss-making units: Textiles Ministry to RBI

NEW DELHI: The Textiles Ministry has said it will urge the Reserve Bank to relax lending norms for the textile industry which has been hit by the volatility in raw material prices and slump in domestic demand.

"Something needs to be done... something needs to be worked out regarding the asset classification (norms). Whether the Reserve Bank of India ( RBI) let its guard down on some of the norms that is something we have to work very hard upon in this month," Textiles Secretary Rita Menon said.

The Textiles Ministry has been following the matter with the RBI and the Finance Ministry after considering the industry's demand for resetting of bank loans worth Rs one lakh crore.

The textiles industry, which has been hit by a sharp fall in cotton yarn prices, poor domestic demand and curb on cotton yarn exports in December last year, is finding difficult to repay term loans and financing working capital.

"Unprecedented raw material price volatility coupled with steep price fall in April has made immediate repercussions on the domestic industry," said a letter written by the Confederation of Indian Textile Industry (CITI) to Textiles Ministry.

According to Menon, restructuring is needed as large number of units are involved.

CITI had also pointed out that out of 287 companies listed on the Bombay Stock Exchange, 122 companies have reported losses in the first quarter of this fiscal and 166 firms have shown poor results.

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

"Its not a handout in terms of cash, it is certainly going to be a reset, a moratorium and certain principles relating to working capital term loan to be able to survive or buy more cotton or fibre," she added.