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No relaxation for textile debt recast

BS Reporter  |  Mumbai 

The Reserve Bank of India (RBI) will not allow any special dispensation for loans to be restructured by banks for the textile industry, as only 20 per cent of units in the sector are under stress.

Industry representatives are to meet ministry officials on Friday to discuss the debt recast issue.

In a recent meeting with bankers, top RBI officials said banks had to undertake a debt recast according to the norms that specify higher provisioning after restructuring of debt.

Once a standard asset is restructured, banks have to increase provisioning by five times, to two per cent.

Banks had asked RBI to relax the higher requirement.

Total debt of the textile sector was Rs 1.56 lakh crore, of which Rs 35,000 crore was proposed for restructuring. The Union ministry had approved a restructuring plan for the Rs 35,000-crore debt.

BoB Capital Markets, which had prepared a report on the debt recast plans, had noted only 20 per cent of the units were under stress. Bankers say this was one reason the regulator gave for not allowing any dispensation.

If it gave such a waiver when only a fifth of units were under stress, RBI had said, there would be similar requests from other sectors.

In addition, RBI had expressed reservations over relaxing norms for a single sector, saying it would set a wrong precedent, bankers said.

The textile sector has a 2.7 per cent share of total banking credit and accounted for 4.5 per cent share of total non-performing assets, according to consultancy firm

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First Published: Wed, July 11 2012. 00:46 IST