Officials from the ministry of textiles and finance, Reserve Bank of India along with representatives from the banking and textile sector are expected to meet on July 13 to discuss the restructuring of textile loans, said a source in the know of the matter.
The finance ministry had accepted the textile ministry’s proposals on restructuring Rs 35,000 crore of the textile industry’s debt.
According to sources, RBI is not in approval of the asset reclassification of companies who would go in for loan restructuring. The proposal also included a two-year moratorium on repayment of the principal and converting some working capital loans to term loans.
So far, 59 cases from the textile industry have been referred for corporate debt restructuring (CDR) and debt of Rs 11,661 crore have been repackaged. The State Bank of India alone has non-performing assets (NPAs) worth Rs 1,976 crore in the sector. The hope, in the sector, is to secure Rs 25,000 crore for debt restructuring, as some companies are in a position to work with existing resources.
The industry was hit by high volatility in cotton prices last year. Prices rose to Rs 62,000 a candy (356 kg) last year around this time and then declined to almost half the level. Cotton is now trading at Rs 33,000 a candy. In 2010-11, the government capped cotton yarn export at 720 million kg, as a result of which many spinners were left with huge inventories. This had resulted in a glut of yarn, while the industry and spinners had cut production and went on strike against the government’s uncertain export policy.
All these had caused mounting losses. At present, spinners are not operating at full capacity, though many are facing a severe cash crunch. Even if there is demand, some mills are unable to accept orders, as they lack sufficient working capital, said an observer.