Textile companies may get better loan options

Wednesday, 30 November 2011
Indian Commerce and textiles minister Anand Sharma has appealed to the finance minister Pranab Mukherjee for restructuring of textile companies’ loans as well as for extending a 2 per cent interest subvention for SMEs and bigger garment and knit-wear units. If the proposal is approved, it would help textiles mills hit by high raw material costs and slowing global economy affecting the order books.

According to industry insiders, Sharma has asked for a suspension of repayment of the principal amount by the capital-intensive textile units for two years from July 1, which account for 90 per cent of the industry’s loans, and a one-year moratorium for other textile segments. Since dozens of mills were allowed restructuring of loans during the slowdown in 2008-09, the ministry has also asked for tweaking of the Reserve Bank’s prudential norms that stipulate any repeated rescheduling of loans be declared non-performing assets.

Textile mills were badly hit when they bought cotton at record prices last marketing year that started October 1, 2010, and product prices suddenly fell significantly from April on poor demand with signals of another economic slowdown in the US and the EU which together account for around 65 per cent of India’s textile exports. To relax the interest burden, the ministry has suggested that banks should provide foreign currency loans to all textile exporters to help reduce the credit cost considerably.

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